Attracting wind generators to the wholesale market by mitigating individual exposure to intermittent outputs: An adaptation of the Brazilian experience with hydro generation

Abstract

Wind generators in the British electricity market have historically been spilling a significant part of their output in the system, without trading them in the open market. The effect is that the system operator has to operate in an environment where self-balance is no longer the norm, creating ever growing challenges for decisions in the real time operation of the market, especially moving forwards with the likely increased penetration of wind generation in Great Britain in response to governmental incentives to achieve its carbon emissions reduction targets. These low levels of trading activities are mostly due to the combination of uncertainties in wind generation output levels, which are intermittent in nature, and the relative small size of wind farm operators who lack large portfolios to hedge for such uncertainties. This paper illustrates the potential benefit of the introduction of an energy reallocation mechanism, similar to that existent in Brazil for hydro generators, in encouraging wind farm owners to increase their trading activities, reaching a more efficient market position and improving the liquidity of the wholesale electricity market. The investigation is done through the simulation of the maximum profitability of the combination of a number of wind farms with and without such scheme.