Integration of large-scale wind generation intothe Finnish power system

Santtu Karhinen1,2, Hannu Huuki1,2, MariaKopsakangas-Savolainen1,2 & Rauli Svento1

1Oulu Business SchoolUniversity of Oulu

2Finnish Environment Institute

Background

I Wind generation capacity has increased rapidlyI Globally set targets for emissions reductionsI Decreased investment costs

I In FinlandI Wind generation from 1st of July 2014 to 30th of June 2015

was 1.72 TWh (2.1% of load)I Targets for 2020 and 2025: 6 and 9 TWh, respectively (7-11%

of 2015 load)

I Wind power fluctuates due to stochastic weather conditions(variability) and the output can’t be perfectly forecasted(intermittency)

I Therefore, additional costly backup and balancing power areneeded in order to ensure high level of security of supply

Research questions

I Can wind power integration be supported with the gains insocial welfare and in emissions reduction?

I Balancing power adequacy in case of increasing wind powergeneration?

I How large are the system levelized cost of wind powerintegration into the existing power system?

I Balancing costsI Profile costsI Grid-related costs

Variability and intermittency of wind power

Figure: Integration costs of wind power (Hirth et al. 2015)

Model framework

I A system operator is a social planner, who makes investmentand production decisions

I Stage 1:I System operator chooses the amount of investments in new

combined cycle gas turbines (CCGT)

I Stage 2:I For each hour of the expected lifetime of the generators, the

operator observes latest weather forecast (can be utilised in theday-ahead market) and generators in scheduled maintenance

I System operator schedules dispatchable generators forproduction and spinning reserves

I Model is solved so that optimal level of new investments arefound that maximise the expected social welfare in long-run

Weather forecast data and estimation

I Finnish Meteorological Institute (FMI) provides forecasts onI Temperature, cloud cover, wind speed and precipitation,I Made at 6 AM UTC for next 54 hours,I For 162 locations with wide geographical coverage

I National load and wind output dataI Hourly load and wind output are estimated with seemingly

unrelated regression (SUR)I Weather variables as well as month, day and hour dummies are

included as regressors

I For load R2 = 0.923 for and for wind R2 = 0.802

I We simulate load and wind output distributions by resamplingresiduals

Results

Wind power penetration 0% 5% 10% 15% 20%

Wind capacity (MW) 0 1678 3355 5033 6711Wind generation (TWh/year) 0 4.43 8.85 13.28 17.70Load (TWh/year) 88.66 88.66 88.66 88.66 88.66Foregone FF generators (#) 0 (34) 2 6 7 7Mean system outage prob. 1.364e-4 1.278e-4 1.733e-4 1.659e-4 1.527e-4Reserves (% from net load) 11.26 11.64 12.53 19.36 21.44

Production costs (me) 1521.4 1275.1 1046.0 848.6 697.3Reserve costs (me) 270.0 269.3 284.0 292.2 290.2Fossil investment costs (me) 3474.6 3270.2 2861.4 2759.2 2759.2Wind investment costs (me) 0 4194.3 8388.5 10066.2 13421.6Startup costs (me) 90.7 94.9 126.2 158.1 189.3

Change in surplus in (me) -46.18 -121.51 -233.49 -387.40Change in surplus per MWh -10.44 -13.73 -17.59 -21.89

Change in surplus per tonCO2 reduced

-26.44 -34.77 -42.46 -51.48

Table: System effects of large-scale wind

Results

Wind power penetration 5% 10% 15% 20%

Balancing costs 2.70 4.89 6.23 7.35Profile costs 15.69 11.82 12.11 13.48Grid costs 2.97 2.97 2.97 2.97

Total integration cost 21.36 19.68 21.31 23.80

Table: Cost components of wind in different scenarios

Conclusions

I From investor’s point-of-view wind power may be perceiveddifferently than from societal point-of-view

I The effect of integration costs of wind as well as feed-in tariffsfor wind are carried out by consumers and non-wind producers

I Estimated levelized cost of wind is 74.14 e/MWh withexpected lifetime of 25 years and 6% discount rate

I Adding the estimated integration costs, system levelised costwith 10% wind is 74.14 + 19.68 = 93.82 e/MWh

Conclusions

I Main purpose in encouraging RES investments is emissionsreductions

I We estimate that the loss in social surplus is between26.44-51.48 e/MWh per ton CO2 reduced

I Assuming that the social cost of carbon is the mean estimateof 83.7e/MWh in Tol (2005), some kind of supporting schemefor wind power generation may be justified

Work to be done

I Allowing importing and exportingI Discussion of self-sufficiency (investments in generating

capacity) vs. stronger market integration (investments ininterconnector capacity)

I Allow flexible allocation of hydropower

Thank you!