Wind generation imbalances penalties in day-ahead energy markets: The Italian case

Today there is a lot of interest in wind energy exploitation. It has been emphasized by adopted incentive mechanisms and by the possibility to sell energy to the electrical market in different ways. The rise of wind installed power requires more energy for ancillary services. Moreover, imbalance costs have to be sustained by the Transmission System Operator (TSO) which could charge them to all the consumers where wind power producers are not penalized for their imbalances. To solve this problem some solutions can be adopted depending on market rules that are different from one country to another. In particular referring to the current Italian market framework and taking into account to the state-of-the-art wind power forecasting, an economic assessment of imbalance for some wind farms have been compared to balancing costs of the TSO. Different stochastic approaches have been adopted, using available historical data, in the analysis of various scenarios both for the TSO and for wind plant owners. Also possible mechanisms for imbalance settlements have been proposed in order to maintain grid safety costs within a reasonable level for electricity consumers, and to avoid an excessively penalizing treatment for wind energy source investments in order to satisfy environmental targets of the European Community.

Research highlights
► We have analyzed the impact of wind generation in Italian electrical market.
► We examined the ancillary service costs sustained by the TSO in Sicily with different wind power forecasting approaches.
► We have proposed possible mechanisms for imbalance settlement to reach grid safety costs and to avoid an excessively penalizing treatment for wind energy source investments.
► We demonstrate that a settlement scenario with two thresholds of penalization could be chosen to achieve our objectives.
► The presented approach has a general purpose including other electrical markets.