Managing forecast errors at the Nordic power market at presence of large amounts of wind power

Abstract: The aim of the study is to investigate possibilities to manage forecast errors at theNordic power market based on the size of the actor. This is part of a larger questionat hand, whether the Nordic power market structure is suitable to support large windpower installations.An increased amount of wind power will unavoidably generate an increased amountof 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 forvarying size of wind power production. Forecast error volumes are modeledassociated with each actor in the scenario.· Secondly, conditions at the intraday market and the regulating market during 2006are investigated and the result is used as input for the next step.· Last, price models are developed and used to calculate future imbalance costsassociated to each actor, and the cost saving potential in different options. Becauseof uncertainties about the future intraday/regulating market situation, severalcalculations are carried out with different perspectives for the model calibration,different distributions of the forecast error volumes between the intraday market andthe 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 theforecast error is “sold” or if the adjustment is “bought”. The cost saving potentialdiffers significantly between the smaller and the larger actors.