Trading wind power in the UK using an imbalance penalty reduction strategy

In the UK, power is mainly traded in a forward market that penalises parties that introduce imbalances to the system at delivery time. This is disadvantageous for wind generators that have to trade power at least one hour in advance (gate closure) based on imperfect forecasts. As a result, wind generators are driven to trade power based on strategies to minimise imbalance penalties. The use of such strategies can increase profits for wind generators, and encourage the construction of wind power projects (WPPs) with higher generation capacities. This paper studies the impacts of a trading strategy on the profits and optimal design of WPPs in the UK considering different levels of wind penetration and demand response (DR) in the system. The results suggest that the use of a trading strategy leads to increased profits for wind generators, especially in adverse market scenarios where the price of wind energy is low, and it can affect the optimal design of new WPPs.