Measuring the impact of wind power and intermittency*

Wind power is crucial to decarbonizing electricity markets but is intermittent, which complicates operational management. We assess the welfare impact of wind power on the Spanish electricity market during the years 2009-2018, with a focus on how wind impacts congestion and reliability costs. In the baseline results, for an additional GWh of forecasted wind generation, we estimate that operational costs go up by about 0.19 EUR/ MWh compared to an average of 3.85 EUR/MWh. We find no evidence of these marginal impacts significantly increasing with wind availability. Using detailed bidding data for congestion and reliability markets, we highlight how changes in market design can reduce the negative impacts of wind power on the operation of the grid.