Managing Forecast Errors at the Nordic Power Market at Presence of Large Amounts of Wind Power

University essay from

Author: Johan Gustafsson; [2008]

Keywords: ;


The aim of the study is to investigate possibilities to manage forecast errors at the Nordic power market based on the size of the actor. This is part of a larger question at hand, whether the Nordic power market structure is suitable to support large wind power installations.

An increased amount of wind power will unavoidably generate an increased amount of forecast errors and raise the demand for adjustment and regulating power. The investigation is carried out in three steps.

·First a scenario is created containing eight actors that is balance responsible for varying size of wind power production. Forecast error volumes are modeled associated with each actor in the scenario.

·Secondly, conditions at the intraday market and the regulating market during 2006 are investigated and the result is used as input for the next step.

·Last, price models are developed and used to calculate future imbalance costs associated to each actor, and the cost saving potential in different options. Because of uncertainties about the future intraday/regulating market situation, several calculations are carried out with different perspectives for the model calibration, different distributions of the forecast error volumes between the intraday market and the regulating market, and different options for managing the forecasts error.

The results indicate that it is a major difference in the cost saving potential if the forecast error is “sold” or if the adjustment is “bought”. The cost saving potential differs significantly between the smaller and the larger actors.

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