The Effect of Wind and Demand Uncertainty on Electricity Prices and System Performance

The uncertainty in wind power forecasts often results in forecast errors that require system operators to redispatch a power system in real time, once the actual wind generation is known. This paper analyzes the financial impact of this uncertainty in terms of the costs of redispatch. The analysis uses an optimal power flow (OPF) model in a Monte Carlo Simulation (MCS) framework to estimate these cost impacts as the difference in production cost and system lambda from a base case dispatch. Using a range of wind generation, reserve margins and assumptions for the ramp capability of non-wind generators, the results from the OPF and MCS show that wind power forecast uncertainty combined with load uncertainty can increase the variability in production cost for situations where moderate wind and load are expected, and will increase the variability in system lambda for the situation where low wind output and high load are expected. The results also show that on average there are few voltage violations.