Effects of wholesale electricity markets on wind generation in the midwestern United States

This paper estimates the effect of starting the Midcontinent ISO electricity market in 2005 on wind generation. An average increase in wind plant capacity factors of 1.7-2.8 percentage points associated with the start of the market is estimated, relative to neighboring wind plants not in the market. These results are robust to potentially confounding variation associated with wind speed differences determined by weather. Policy makers in regions of increasing wind generation should consider expanding the wholesale market region as a tool to deal with variability of renewable generation. Many technical experts and market participants provide anecdotes that competitive wholesale markets are beneficial for wind energy, this analysis provides the first statistical evidence to support that claim.