Valuation of switchable tariff for wind energy

• Type: Article in International Scientific Journal
• Date: 2006

Authors

Yu, W (Author) Other; Sheble, GB (Author) Other; João Peças Lopes (Author) FEUP; Manuel Matos (Author) FEUP

Journal

Title: Electric Power Systems Research

Vol. 76 No. 5

Pages: 382-388

ISSN: 0378-7796

Publisher: Elsevier

Indexing

ISI Web of Knowledge - 31 Citations

Scopus - 36 Citations

Other information

Authenticus ID: P-004-MXF

DOI: 10.1016/j.epsr.2005.09.004

Abstract (EN): 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.

Language: English

Type (Professor's evaluation): Scientific

No. of pages: 7