The impact of wind generation on the electricity spot-market price level and variance: The Texas experience

The literature on renewable energy suggests that an increase in intermittent wind generation would reduce the spot electricity market price by displacing high fuel-cost marginal generation. Taking advantage of a large file of Texas-based 15-min data, we show that while rising wind generation does indeed tend to reduce the level of spot prices, it is also likely to enlarge the spot-price variance. The key policy implication is that increasing use of price risk management should accompany expanded deployment of wind generation.

► Rising wind generation in ERCOT tends to reduce electricity spot prices.
► Rising wind generation in ERCOT is also likely to enlarge the spot-price variance.
► Increased price risk management should accompany expanded wind power deployment.