Economic Analysis of Power Generation Forecast Utilization by Merchant Wind Plants

Wind plants that act as merchants in electricity markets are subject to adverse market conditions that result from the stochastic nature of the power they generate. The inability of these merchant wind plants to follow a deterministic power generation schedule exposes them to the volatility of real-time energy prices and, in some markets, to charges based upon their deviations from a predetermined schedule. This paper analyzes the role and effect that a forecast of wind plant power generation has in merchant wind plant market participation. The analysis is based on case studies that compare three forecast methods. The forecast methods considered are based on persistence, climatology and numerical weather prediction. The wind data and forecasts thereof are obtained from an existing wind plant. The economic analysis is performed in the framework of two electricity markets in order to analyze the effect of different market mechanisms and data on the results. Data from the PJM Interconnection and the Midwest Independent System Operator are used in the case studies. The results show the advantages of the utilization of wind plant generation forecasts by merchant wind plants.