Updates

Twice a year, we publish an update of what is going on at Neon. Subscribe.

March 2016

Article: System-friendly wind power
The market value of wind power drops with increasing penetration rate. This study, recently published in Energy Economics and co-authored by Simon Müller (IEA), assesses “system-friendly” wind turbines with high capacity factors as a means to mitigate the value drop. At 30% penetration, such turbines increase the market value by 15%, according to our model. Additional benefits come from reduced costs for grids and balancing. The study won the INREC best paper award. Read article

Article: Why wind is not coal
Electricity is a peculiar economic good: it is at the same time perfectly homogenous and quite heterogeneous. In this recent Energy Journal paper with Falko Ueckerdt and Ottmar Edenhofer, we explain what implications this has and why “levelized electricity costs”, “grid parity”, and simple models (from CGEs to IAMs) can be easily misunderstood. Read article

Working Paper: Market value analytically
The spot market value of wind power is usually analyzed with computer models. Alexander Radebach and I derive an analytical expression in this paper. At low penetration, the market value is determined by the covariance of winds and load. At high penetration, it is driven by the variance of wind. Read paper

Working Paper: Electricity data
Tracking electricity generation data is difficult, particularly in the case of Germany. This paper explains where to find and how to use German electricity data. Recommended for modelers and data analysts. Read paper

Report: Integration costs
Neon advised Agora Energiewende on a report on The Integration Costs of Wind and Solar Power. Read report

 Market update: Germany
Fresh – and surprising – figures on German renewables deployment and balancing power markets. The German balancing paradox prevails: despite record growth in variable renewables, the costs for balancing the grid have declined again.

November 2015

In the Media: The Market Value of Renewables
The market value of wind and solar power continues to receive attention from the popular press. Articles appeared on Project Syndicate, in Handelsblatt, Energy Transition, TheEnergyCollective, and in the Financial Times (read pdf).
Paper on wind power: Journal  |  Open access
Paper on solar power: Journal  |  Open access

Published: Balancing Power and Variable Renewables
This study, published recently in Renewable & Sustainable Energy Reviews, reviews balancing power in the context of the German Energiewende. Balancing power is used to quickly restore the supply-demand balance in power systems. The need for this tends to be increased by the use of wind and solar power. Empirical evidence, however, tells a surprising story: while German wind and solar capacity has tripled since 2008, balancing reserves have been reduced by 15% – and costs fell by 50%! This is the “German balancing paradox”.
Journal  |  Open access

Published: Reasons for the Power Price Drop
Two new pieces appeared on Phasenprüfer, an energy policy blog: a joint article with Christoph Weber that discusses the reasons for the drop in power prices since 2007 (it was mostly the CO2 price, not renewables); and an article arguing that base load power plants are a species in danger of extinction.

Workshop: Open Energy Modeling Initiative in London
For the third time, Neon helped organizing the Open Energy Modeling Workshop. This year, Imperial College London hosted more than 60 participants. If you are interested in open-source energy modeling, the initiative might interest you. The 2016 workshop will be at KTH Stockholm – free of charge.

Started: Open Power System Data platform
Funded by the German government, we are implementing an open platform for power system data. We plan to collect, check, process, document, and provide data that are publicly available but currently inconvenient to use. The project shall be a service provider to the modeling community, providing a public good. A list of data sources, our IT concept, and a legal assessment are online now. Next Tuesday, there will be a webinar to present the project. If you would like to learn more, let me know.

June 2015

Integration costs revisited.
The integration of wind and solar generators into power systems causes “integration costs” – for grids, balancing services, more flexible operation of thermal plants, and reduced utilization of the capital stock embodied in infrastructure. In this paper, we propose a framework to analyze and quantify these costs. We extract estimates of integration costs from 100+ published studies, finding wind integration costs of 25-35 €/MWh at 30% penetration, i.e. up to 50% of generation costs. The paper was voted best IAEE working paper 2014 and received the best paper award at IEWT in Vienna.
Journal  |  Open access  |  IAEE award  |  poster award IEWT | paper award IEWT

Market value of solar.
An update of the “Market value of variable renewables” study is published, focusing on solar power. At low penetration rates (< 2-5%) solar power’s market value turns out to be higher than the average wholesale electricity price. With increasing penetration, the market value declines – the solar premium turns into a solar penalty. In Germany, the value of solar power has fallen from 133% of the average electricity price to 98% as solar penetration increased from zero to 4.7%.
Journal  |  Open access

Optimal share of variable renewables.
This paper estimates the cost-optimal market share of wind and solar power, explicitly taking into account their output variability. Using a numerical model, we estimate the long-term cost-minimal wind power share in Europe to be 20%, three times more than today. Variability significantly impacts results: if winds were constant, the optimal share would be 60%. We present and explain several surprising findings, including a negative impact of CO2 prices on optimal wind deployment. Schalk Cloet from TheEnergyCollective has written a quite positive review of the paper.
Journal  |  Open access | review

Minimal thermal generation.

We empirically estimate the “must-run” thermal generation level econometrically, using observed price data from Germany. We find surprisingly high levels of must-run generation.
Working Paper