Valuation of switchable tariff for wind energy

The current fixed tariff remuneration for wind energy is not compatible with the deregulation of the electric power industry. The time-varying and location-dependent value of renewable energy is not acknowledged. The newly announced switchable tariff for wind energy in the Spanish electricity market...

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Bibliographic Details
Published in:Electric power systems research 2006-03, Vol.76 (5), p.382-388
Main Authors: Yu, Wang, Sheblé, Gerald B., Lopes, Joao A. Peças, Matos, Manuel António
Format: Article
Language:English
Subjects:
Applied sciences
Electric power plants
Electrical engineering. Electrical power engineering
Electrical power engineering
Exact sciences and technology
Non classical power plants
Operation. Load control. Reliability
Power networks and lines
Real option
Renewable energy
Spanish electricity markets
Switchable tariff
Valuation
Wind generation
Wind power plants
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Summary:The current fixed tariff remuneration for wind energy is not compatible with the deregulation of the electric power industry. The time-varying and location-dependent value of renewable energy is not acknowledged. The newly announced switchable tariff for wind energy in the Spanish electricity market provides a promising solution to compensating renewable energy within the deregulated electric power industry. The new switchable tariff provides wind generators more flexibility in operating wind generation assets. Such flexibilities provide option value in coordinating the seasonality of wind energy, demand on electric power and electricity prices movement. This paper models and valuates the flexibility on switching tariff as real compound options for wind generators. Numerical examples valuate wind generation assets under fixed tariff, spot market price taking, and yearly and monthly switchable tariffs. The optimal switching strategies are identified. The impacts of the switchable tariff on sitting criteria and values of wind generation assets are investigated. An improvement on the yearly switchable tariff is suggested to further reduce the operation risk of wind generators and fully explore the efficiency provided by competitive electricity markets.
ISSN:0378-7796
1873-2046
DOI:10.1016/j.epsr.2005.09.004