The Value of Volatile Resources in Electricity Markets

While renewable resources most certainly provide environmental benefits, and also help to meet aggressive renewable energy targets, their deployment has pronounced impacts on system operations. There is an acute need to understand these impacts in order to fully harness the benefits of renewable resource integration. In this paper we focus on the integration of wind energy resources in a multi-settlement electricity market structure. We study the dynamic competitive equilibrium for a stochastic market model, and obtain closed form expressions for the supplier and consumer surpluses. Numerical results based on these formulae show that the value of wind generation to consumers, under the current operational practices, falls dramatically with volatility. In fact, we can establish thresholds for the coefficient of variation beyond which the value of wind is questionable. These findings emphasize the need to investigate operational schemes that address volatility.