Zonal merit-order effects of wind generation development on day-ahead and real-time electricity market prices in Texas

Jay W. ZARNIKAU, Chi Keung WOO, Shuangshuang ZHU

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5 Citations (Scopus)

Abstract

This paper uses a regression-based approach to explore the impact of wind generation development on wholesale electricity prices in the Electric Reliability Council of Texas (ERCOT) market. We find that wind generation development has a greater effect on real-time market (RTM) prices than day-ahead market (DAM) prices. Higher wind generation forecast errors tend to reduce the RTM prices, chiefly because unanticipated increases in wind generation reduce the real-time net loads to be served by fossil fuel power plants. Improving ERCOT's load and wind generation forecast accuracy tends to make the DAM and RTM prices converge, thus enhancing ERCOT's market trading efficiency. Finally, the estimated merit-order effects are greatest in the ERCOT zones where the wind generation capacity locally resides. Copyright © 2016 Incisive Media.
Original languageEnglish
Pages (from-to)17-47
JournalJournal of Energy Markets
Volume9
Issue number4
Early online dateNov 2016
DOIs
Publication statusPublished - Dec 2016

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Fossil fuel power plants
Power markets
Electricity

Citation

Zarnikau, J., Woo, C.-K., & Zhu, S. (2016). Zonal merit-order effects of wind generation development on day-ahead and real-time electricity market prices in Texas. Journal of Energy Markets, 9(4), 17-47.

Keywords

  • Day-ahead market
  • Real-time pricing
  • Wind power
  • Electric Reliability Council of Texas (ERCOT)