Report warns reliance on wind will drive power price volatility

The expansion in wind energy capacity across the British Isles will result in huge electricity price volatility unless major reforms are undertaken to grid management in the UK and Ireland.

That is the conclusion of a study released last week by research firm Pöyry Energy Consulting, which warns that significant investment in grid technologies will be required to ensure that the intermittent nature of wind energy does not undermine the reliability of electricity supplies.

The study is based on more than 2.5 million pieces of data taken from 36 locations in the UK and Ireland between 2000 and 2007.

It argues that plans to generate up to 8GW of wind power for the Irish electricity market and up to 45GW for the British electricity market by 2030 face a significant barrier in the form of intermittent levels of wind energy generation.

The study found that even at an annual level, wind generation output varied by almost 25 per cent in the Irish market and 13 per cent in the British market. It also warned that both markets were affected by the fact that electricity demand is high on frosty nights when there is virtually no wind and low energy output. In contrast, electricity demand tends to fall when strong south westerlies blow across the British Isles, bringing with them warmer air.

It also warns that this level of wind intermittency would lead to huge price variations, resulting in times of negative prices and very short periods with prices at almost £8,000/MWh.

The report concludes that a "variety of solutions are open", including the construction of interconnectors between Ireland and the UK, and the adoption in the UK of a new electricity market model that is closer to the Single Electricity Market model operated in Ireland.

In addition to voicing concerns about the challenges presented by intermittent wind energy levels, the report also notes that increased volatility in electricity prices will undermine the case for investing in traditional thermal power plants.

"If significant wind energy is achieved, along the lines required by the 2020 renewable targets, we predict power stations that are built now will face much more uncertain revenue in the future," the report concludes. "For example, any generation built before 2016 to cover closure under emission regulations of existing coal-fired power stations, would face a volatile future, uncertain to the point that the plant may only operate for a few hours one year and then hundreds of hours the next year."

James Cox, principal consultant at Pöyry, said further research was needed into the wider impact of increased wind energy capacity. "Although additional detailed work needs to be carried out to properly model the behaviour of the grid systems in both countries, our worry at the outset of the study that the very dynamics of variable wind output would challenge the system operators, has moved to concern that the economic environment for thermal plants will be highly challenging," he said.

The report follows a separate study from National Grid, which predicted that the emergence of interconnectors between the UK and Europe, smart grid systems, and new energy storage technologies such as car batteries and pumped hydro plants, would ensure that an increase in wind energy capacity does not lead to any reduction in grid reliability.