We know renewable are intermittent. But as the LCOE Levelized Cost of Electricity are calculated depending on all costs and working hours (energy produced) for once. i.e This price is going to be the same (in case of wind and solar) for the lifestime of the project. I am very eager to know what kinda minor dynamics does the change in weather impacts the prices in a day ahead or a hour ahead market.
As we know we have strong forecasting systems now a days (offshore) and the production forecasting is somehow near to the actual produced energy. But what if the forecast says the production is way too less and the wind company wants to sell the electricity at a higher price?? I hope I have given a clear picture of the scenario.
The US Energy Information Administration has recommended that levelized costs of non-dispatchable sources such as wind or solar may be better compared to the avoided energy cost rather than to the LCOE of dispatchable sources such as fossil fuels or geothermal. This is because introduction of fluctuating power sources may or may not avoid capital and maintenance costs of backup dispatchable sources. Levelized Avoided Cost of Energy (LACE) is the avoided costs from other sources divided by the annual yearly output of the non-dispatchable source. However, the avoided cost is much harder to calculate accurately.
http://www.eia.gov/forecasts/aeo/electricity_generation.cfm
http://www.eia.gov/forecasts/aeo/index.cfm
If I understand your question correctly, you're asking questions about how a one-off daily event (generation below forecast) could impact the LCOE of a plant. The LCOE is based on the lifetime of the plant, and will include predictions on the availability of the plant to generate. The LCOE is equivalent to a minimum long term average price (can also be called long run marginal cost - LRMC) and as long as the long term average price the electricity is sold for is higher than the LCOE, the plant will pay for itself. There is only a problem if the long term average sales of $/MWh*# of MWh is below forecast amounts. A shortfall on a single day is insignificant, and is not likely to lead to a price adjustment to 'make up for lost ground'.
Other matters that will have an influence are whether or not you sell into a capacity market, an energy-only market or if you have contracted your generation to another entity. The NEM in Australia is an energy only market that counts RE as semi-dispatchable - it can be forecast up to a week in advance, but never guaranteed.
If it helps to clarify: RE costs are constant (cost of capital, financing, O&M, no fuel costs) but wholesale electricity prices are generally not.
The answer boils down to the policy. In some countries, systems operators are forced to purchase renewable energy at specific Tariff whenever it is available. In this case, they will still sell that unforecasted energy. However, in case that markets are not obligated to buy that energy, then the plant owner needs either to store it, spill it, or inject it in the grid (probably for no profit). In the last scenario, generators that handle the spinning and load following reserve will decrease their output, but they are still paid for providing the service.
I will focus my comments on the life cycle costs of producing a kWh of power, which is essentially the sum of the fixed costs recovery (depreciation plus a return), variable operating costs (inflation adjusted), and fuel costs (also inflation adjusted). On this narrowly defined costs structure, wind and PV Solar would have zero fuel costs (which is the principal source of price volatilities). By setting fuel costs to zero, the variations that are volume dependent are in reality in the fixed costs recovery, where the denominator is the volume (or quantity Q) assumed for the lifetime of the asset. On a periodic basis, the estimated fixed costs recovery (which is based on a constant Q) may be higher or lower depending on how Q varies. For example, a wind turbine is expected to operate at about 2,000 hours a year. However, because of seasonal (or cyclical) shifts in wind flows, it ends up operating less than 2,000 hours, then the fixed costs would be under-recovered. To compensate for this under-recovery, you adjust the Q and recalculate the revised fixed costs that needs to be recovered, which is expected to be higher.
I will focus my comments on the life cycle costs of producing a kWh of power, which is essentially the sum of the fixed costs recovery (depreciation plus a return), variable operating costs (inflation adjusted), and fuel costs (also inflation adjusted). On this narrowly defined costs structure, wind and PV Solar would have zero fuel costs (which is the principal source of price volatilities). By setting fuel costs to zero, the variations that are volume dependent are in reality in the fixed costs recovery, where the denominator is the volume (or quantity Q) assumed for the lifetime of the asset. On a periodic basis, the estimated fixed costs recovery (which is based on a constant Q) may be higher or lower depending on how Q varies. For example, a wind turbine is expected to operate at about 2,000 hours a year. However, because of seasonal (or cyclical) shifts in wind flows, it ends up operating less than 2,000 hours, then the fixed costs would be under-recovered. To compensate for this under-recovery, you adjust the Q and recalculate the revised fixed costs that needs to be recovered, which is expected to be higher.
In most US electricity markets, the price changes every hour, both in the Day-ahead market and in the Real-time market.
The prediction of the price is not accurate enough. So we usually use stochastic programming to handle the uncertainty of the price. E.g. in the following papers, we use historical prices in MISO to do optimal bidding for the demand response resource. Hope it helps. The price data is available and I can send them to you if you are interested.
https://www.researchgate.net/publication/282743180_Bidding_strategy_in_energy_and_spinning_reserve_markets_for_aluminum_smelters%27_demand_response
Article Bidding strategy in energy and spinning reserve markets for ...
- Badges
- Science topic