Blowing in the wind: Vanishing payoffs of a tolling agreement for natural-gas-fired generation of electricity in Texas

Chi Keung WOO, Ira HOROWITZ, Brian HORII, Ren ORANS, Jay ZARNIKAU

Research output: Contribution to journalArticle

30 Citations (Scopus)

Abstract

We use a large Texas database to quantify the effect of rising wind generation on the payoffs of a tolling agreement for natural-gas-fired generation of electricity. We find that while a 20% increase in wind generation may not have a statistically-significant effect, a 40% increase can reduce the agreement's average payoff by 8% to 13%. Since natural-gas-fired generation is necessary for integrating large amounts of intermittent wind energy into an electric grid, our finding contributes to the policy debate of capacity adequacy and system reliability in a restructured electricity market that will see large-scale wind-generation development. Copyright © 2012 by the IAEE. All rights reserved.
Original languageEnglish
Pages (from-to)207-229
JournalEnergy Journal
Volume33
Issue number1
DOIs
Publication statusPublished - 2012

Citation

Woo, C.-K., Horowitz, I., Horii, B., Orans, R., & Zarnikau, J. (2012). Blowing in the wind: Vanishing payoffs of a tolling agreement for natural-gas-fired generation of electricity in Texas. The Energy Journal, 33(1), 207-229. doi: 10.5547/ISSN0195-6574-EJ-Vol33-No1-8

Keywords

  • Investment incentive
  • Spark spread option
  • Tolling agreement
  • Wind generation

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