Variance Analysis of Wind and Natural Gas Generation under Different Market Structures: Some Observations

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Does large scale penetration of renewable generation such as wind and solar power pose economic and operational burdens on the electricity system? A number of studies have pointed to the potential benefits of renewable generation as a hedge against the volatility and potential escalation of fossil fuel prices. Research also suggests that the lack of correlation of renewable energy costs with fossil fuel prices means that adding large amounts of wind or solar generation may also reduce the volatility of system-wide electricity costs. Such variance reduction of system costs may be of significant value to consumers due to risk aversion. ... continued below

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50 pp.

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Bush, B.; Jenkin, T.; Lipowicz, D.; Arent, D. J. & Cooke, R. January 1, 2012.

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Description

Does large scale penetration of renewable generation such as wind and solar power pose economic and operational burdens on the electricity system? A number of studies have pointed to the potential benefits of renewable generation as a hedge against the volatility and potential escalation of fossil fuel prices. Research also suggests that the lack of correlation of renewable energy costs with fossil fuel prices means that adding large amounts of wind or solar generation may also reduce the volatility of system-wide electricity costs. Such variance reduction of system costs may be of significant value to consumers due to risk aversion. The analysis in this report recognizes that the potential value of risk mitigation associated with wind generation and natural gas generation may depend on whether one considers the consumer's perspective or the investor's perspective and whether the market is regulated or deregulated. We analyze the risk and return trade-offs for wind and natural gas generation for deregulated markets based on hourly prices and load over a 10-year period using historical data in the PJM Interconnection (PJM) from 1999 to 2008. Similar analysis is then simulated and evaluated for regulated markets under certain assumptions.

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50 pp.

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  • Report No.: NREL/TP-6A20-52790
  • Grant Number: AC36-08GO28308
  • DOI: 10.2172/1033025 | External Link
  • Office of Scientific & Technical Information Report Number: 1033025
  • Archival Resource Key: ark:/67531/metadc830321

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Office of Scientific & Technical Information Technical Reports

Reports, articles and other documents harvested from the Office of Scientific and Technical Information.

Office of Scientific and Technical Information (OSTI) is the Department of Energy (DOE) office that collects, preserves, and disseminates DOE-sponsored research and development (R&D) results that are the outcomes of R&D projects or other funded activities at DOE labs and facilities nationwide and grantees at universities and other institutions.

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  • January 1, 2012

Added to The UNT Digital Library

  • May 19, 2016, 3:16 p.m.

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  • Dec. 15, 2016, 2:26 p.m.

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Bush, B.; Jenkin, T.; Lipowicz, D.; Arent, D. J. & Cooke, R. Variance Analysis of Wind and Natural Gas Generation under Different Market Structures: Some Observations, report, January 1, 2012; Golden, Colorado. (digital.library.unt.edu/ark:/67531/metadc830321/: accessed May 21, 2018), University of North Texas Libraries, Digital Library, digital.library.unt.edu; crediting UNT Libraries Government Documents Department.