The Value of Wind Energy in the European Electricity Market – Application of a Stochastic Fundamental Model

In this paper a novel stochastic fundamental European electricity market model (E2M2s) is applied to estimate the value of electricity produced by wind turbines. The principle of E2M2s is cost minimisation in the European power network. The model determines the marginal system costs mainly as a function of available generation and transmission capacities, primary energy prices, plant characteristics and electricity demand. Thereby notably reduced efficiencies at part load, start-up costs and reserve power requirements are taken into account. In extension to many other models available in the open literature E2M2s handles investments in new power plants endogenously. Since hydropower is of high relevance in the European power system, also time-coupling hydro storage constraints are considered. To be able to estimate the value of fluctuating RES-E, the fundamental modelling approach is significantly extended by introducing a scenario grid accounting for the uncertainties of wind and hydro power availability. Exemplary results are presented for the stochastic model in comparison with a deterministic version. The results are discussed for a German case study. It is shown that the value of wind is overestimated in a deterministic model. Especially the decreasing capacity credit with increasing installed wind capacities can not sufficiently be modelled. The proposed stochastic model E2M2s, however, can give far more realistic estimates of the value of wind energy in the European system.