Estimating the impact of wind generation and wind forecast errors on energy prices and costs in Ireland

This paper studies the impact of wind generation on system costs and prices in Ireland. The importance of wind power and potential impacts on system costs is of interest to power system planners and policy makers globally. However, the impact of wind generation on system costs has been only studied with limited actual data from power systems with increased wind penetration. The paper uses a unique dataset of half-hourly system demand, generation, forecast and actual wind generation, along with Irish system marginal price (SMP) data from 2008 to autumn 2012. An econometric time-series model of SMP as a function of forecast and realized demand and wind generation yields results which suggest that each 1% increase in wind generation reduces SMP in Ireland by about 0.06%, while each 1% wind forecast error increases SMP about 0.02%. In absolute terms, though, at the mean the impact of wind forecast errors is small, or about 0.4€cent/MWh-wind generated.