Wednesday, February 29, 2012

The Impact of Wind Power on European Gas Markets

The International Energy Agency recently released a working paper titled "The Impact of Wind Power on European Natural Gas Markets." The themes explored don't appear, from my initial review of only the Executive Summary, to differ from either the Oxford Institute for Energy Studies' "“The Impact of Import Dependency and Wind Generation on UK Gas Demand and Security of Supply to 2025,” nor my own analysis of Ontario's situation clumsily built on the framework of the Oxford study.

Selected quotes, with my own emphasis in bold formatting, from "The Impact of Wind Power on European Natural Gas Markets:"
An analysis of the effect of an increasing wind market share on residual demand shows that wind significantly alters the load duration curve (LDC) of residual demand, changing not only its size but also its slope. Comparing the LDC of demand and residual demand shows how wind strongly decreases the average capacity factor of residual demand; the share of capacity running at high capacity factors (70% to 100%) decreases, while the amount of capacity running at low capacity factors (0% to 30%) increases strongly. A decreasing capacity factor can have a significant impact on the relative profitability of investments in different types of generation capacity. As the capacity factor decreases, the levelised costs of electricity (LCOE) of generation technologies with high investment costs, such as coal‐ and especially nuclear‐fired capacity, increase faster than those of technologies with lower investment costs, such as gas‐fired capacity.
...natural gas should not be seen as a inexpensive or easy way to support a higher wind market share. An increasing wind market share strongly decreases the capacity factor of gas‐fired generation capacity, thereby increasing the levelised costs of electricity (LCOE) of electricity production by gas‐fired generation technologies. The diminished capacity factor also leads to a decreased utilisation rate of transport capacity bringing gas to gasfired generation plants, leading to higher transport costs.

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