What is the Cost of Negative Bidding by Wind? A Unit Commitment Analysis of Cost and Emissions

We use a unit commitment (UC) model to quantify the operational impacts of subsidizing wind generation when energy prices are negative. Such prices occur increasingly often in U.S. and European Union (EU) markets. Subsidies such as production tax credits, feed-in tariffs, and renewable energy credits motivate renewable generators to submit negative price offers; this lessened flexibility increases system operation and management costs and, in some cases, CO2 emissions when energy prices are negative. Our simulations of large negative bids can also be interpreted as representing EU policies of granting wind absolute dispatch priority. Applications to four hypothetical systems with high wind penetration and distinct generation mixes quantify the UC and dispatch effects of negative bids. Larger negative bids lead to less wind spillage (reducing the 2.8% average curtailment under $0 bids to 1.0%), more conventional plant startups, higher system costs, and, in many cases, higher total CO2 emissions (by up to 2%). In some systems, wind power's effective incremental emissions are as high as coal's. This impact depends strongly on generation mix, carbon price, and the size of the negative bids. In general, there can be significant economic and, often, environmental benefits to reforming renewable support policies to encourage flexibility in operations.