Handling of wind power forecast errors in the Nordic power market

Wind power production is variable by nature. These variations can be forecasted to some extent, by methods based on time series analysis or neural networks, for example. When forecasting more than 4 hours ahead, meteorological forecasts for wind speed are needed. The longer the time horizon, the more difficult it gets to forecast the production accurately, especially at hour-to-hour precision. Forecasting day ahead means having to correct on average 30-40 % of wind power production later. To handle the forecast errors, there can be trade up to the delivery hour, and the final imbalances to schedules are charged by regulating power prices. This paper outlines the forecast errors of wind power producers in the electricity market. The resulting benefits of shorter times between bids and delivery of production, as well as the benefits of pooling wind power production from larger areas are presented.