Fluctuating renewable energy on the power exchange

Many countries around the world liberalise their electricity markets by introducing power exchanges. At the same time the share of renewable energy supplies is steadily increasing. Renewable energy supplies, such as are derived from sunlight or wind, have more fluctuating production patterns than those derived from more conventional power generation. Power exchange is one way to balance out the fluctuations in energy production. Generators of fluctuating power can incorporate their production offers on the daily spot market on the power exchange at the same prices as other generators. The only extra expenses for fluctuating power arises if the generators are unable to fulfil the commitments made on the spot market when the actual deliveries take place. This expense comes about from the regulation expense the system operator encounters by maintaining the total balance between supply and demand on the spot market. The goal of this chapter is to examine this type of expense and how the use of a power exchange tends to balance out the effect of fluctuations in wind power production. To illustrate this, the Nordic power market is used as the main example. The chapter briefly describes the different markets of Nord Pool, the Nordic power exchange, and their potential use for enabling wind power to be utilised fully. By use of research results on the prices on Nord Pool and a Danish case study, different scenarios are set up for the wind power producer's use of the power exchange. It is found that not only does the accuracy of the prediction influence the use of the power exchange, but the structure of the power exchange itself may also play an important role.