Hybrid technologiesProject Achieving Cost-Affective Abatement
Report: A Game-Theoretic Analysis of Wind Generation Variability on Electricity Markets (PDF 1MB)
This report details wind generation variability in an energy-only market such Australian National Electricity Market (NEM) and how it can create significant revenue uncertainties for incumbent generators and substantially increase price risks faced by retailers.
This paper presents a Cournot game model to formally analyze how high volatility of wind generation in a concentrated energy-only market can raise the peak/shoulder period (of typically low wind generation) prices to offset the foregone revenue during off-peak periods (of high wind generation). A Monte Carlo simulation around a Cournot game is formulated as an inter temporal nonlinear optimization problem to assess these issues. The model is implemented for the South Australian zone of the Australian NEM that has experienced high growth in wind generation in recent years. The model results support some of the observed spot pricing behavior in the region in recent years. These findings have significant ramifications for the efficacy of the energy-only market in scenarios with high penetration of intermittent generation.