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CEIC-10-05

"The Cost of Wind Power Variability"
Warren Katzenstein and Jay Apt

Abstract:
We develop a metric to quantify the sub-hourly variability cost of individual wind plants and show its use in valuing reductions in wind power variability. Our method partitions wind energy into hourly and sub-hourly components and uses corresponding market prices to determine the cost of variability. The metric is applicable to variability at all time scales faster than hourly, and can be applied to long-period forecast errors. We use publically available data at 15 minute time resolution to apply the method to ERCOT, the largest wind power production region in the United States. The range of variability costs arising from 15 minute to 1 hour variations (termed load following) for 20 wind plants in ERCOT was $6.79 to 11.5 per MWh (mean of $8.73 ±$1.26 per MWh) in 2008 and $3.16 to 5.12 per MWh (mean of $3.90 ±$0.52 per MWh) in 2009. Load following variability costs decrease as wind plant capacity factors increase, indicating wind plants sited in locations with good wind resources cost a system less to integrate.
Twenty interconnected wind plants have a variability cost of $4.35 per MWh in 2008. The marginal benefit of interconnecting another wind plant diminishes rapidly: it is less than $3.43 per MWh for systems with 2 wind plants already interconnected, less than $0.7 per MWh for 4-7 wind plants, and less than $0.2 per MWh for 8 or more wind plants. This method can be used to value the installation of storage and other techniques to mitigate wind variability.

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