Blowing in the wind: Vanishing payoffs of a tolling agreement for natural-gas-fired generation of electricity in Texas

Chi-Keung WOO*, Ira Horowitz, Brian Horii, Ren Orans, Jay Zarnikau

*Corresponding author for this work

    Research output: Contribution to journalJournal articlepeer-review

    37 Citations (Scopus)

    Abstract

    We use a large Texas database to quantify the effect of rising wind generation on the payoffs of a tolling agreement for natural-gas-fired generation of electricity. We find that while a 20% increase in wind generation may not have a statistically-significant effect, a 40% increase can reduce the agreement's average payoff by 8% to 13%. Since natural-gas-fired generation is necessary for integrating large amounts of intermittent wind energy into an electric grid, our finding contributes to the policy debate of capacity adequacy and system reliability in a restructured electricity market that will see large-scale wind-generation development.

    Original languageEnglish
    Pages (from-to)207-230
    Number of pages24
    JournalEnergy Journal
    Volume33
    Issue number1
    DOIs
    Publication statusPublished - 2012

    Scopus Subject Areas

    • Economics and Econometrics
    • Energy(all)

    User-Defined Keywords

    • Investment incentive
    • Spark spread option
    • Tolling agreement
    • Wind generation

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