A Power Market Model for studying the Impact of Wind Power on Spot Prices

Abstract- It is expected that the share of wind power generation in the European power markets will increase considerably in the years to come. The combination of two special character-istics of wind power, its fluctuating power output and almost zero marginal costs, suggests that wind power can force electricity prices down on windy days. This paper’s objective is to quantify the impact of wind power on spot prices in Western Denmark, both today and in future scenarios with higher wind power penetration. The analysis uses a power market model of Northern Europe with efficient markets and completely inelastic demand to calculate the hourly spot prices. Historical load values, hydro power inflow and wind generation data are taken as input to the model. Insights from simulation runs with various levels of wind power penetration lead to a discussion of the limits on income to wind turbine owners and the possible gains of using Norwegian hydro reservoirs to bal-ance out the fluctuations in wind power output