Wind Power and Electricity Markets - A study of wind power capacity, trade and prices on the Nordic electricity market.

Abstract: Global wind power capacity has greatly increased in the last decades and is in certain areas constituting a significant share of generating capacity. This thesis examines wind power production data along with prices and inter-regional trade volumes on the Nordic electricity market Nord Pool Spot to deduce the effects of wind power on the grid. The research focused on Denmark, since it gets a very large fraction of its energy from wind power and keeps excellent energy data available for research. By computing measures of the state of the energy market and looking at the developments of these over time as well as their correlation to wind power capacity, conclusions were drawn on the role of wind power in the electricity market. It was found that investments in wind power capacity had not experienced decreasing marginal returns but that wind power had reduced the capacity utilization of conventional Danish power plants. Wind energy was found to be sold on average at 10 % lower prices than conventional energy and Danish prices were found to have increased relative to Norwegian prices, although causation in wind power expansion could not be proven. Spot price standard deviation did not increase notably during the time span examined. As wind power capacity increased, wind power production became an increasingly accurate predictor of electricity export and Danish trade balance did worsen, although not in a statistically significant manner. Neither transmission capacity nor profits made by operators of transmission cables increased during the period. Subsidies were found have expanded rapidly during the 21st century and were shown to be good predictors of wind power capacity expansion, with a lag of 1-2 years. Around 20 % of Danish wind power subsidies were exported during the period studied. The thesis concludes that the Nordic electricity market has incorporated large volumes of intermittent power capacity without any radical effects on trade or prices, plausibly due to large hydro-electric capacity, and with a likely decrease in CO2 emissions.