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Economic Aspects: Integration Costs and Benefits

The introduction of significant amounts of wind energy into the power system brings with it a series of economic impacts, both positive and negative. At power system level, two main factors determine wind energy integration costs:

  1. Balancing needs; and
  2. Grid infrastructure.

The additional balancing cost in a power system arises from the inherent variable nature of wind power, requiring changes in the configuration, scheduling and operation of other generators to deal with unpredicted deviations between supply and demand. Here, we demonstrate that there is sufficient evidence available from national studies to make a good estimate of such costs. Furthermore, they are fairly low in comparison with the generation costs of wind energy and the overall balancing costs of the power system.

Network upgrade costs are necessary for a number of reasons. Firstly, additional transmission lines and capacity need to be provided to reach and connect existing and future wind farm sites and to transport power flows in the transmission and distribution networks. These flows result both from an increasing demand and trade of electricity and from the rise of wind power. At significant wind energy penetrations, depending on the technical characteristics of the wind projects and trade flows, the networks must also be adapted to improve voltage management. Furthermore, limited interconnection capacity is often a barrier for optimally capturing the benefits of the continental nature of the wind resource, other renewable energy sources and electricity trade in general. In this respect, any infrastructure improvement will provide multiple benefits to the system, and therefore its cost should not be allocated only to wind power generation.

The cost of modifying the power system with significant amounts of wind energy increases in a linear fashion and identifying its ‘economic optimum’ is not evident, as costs are accompanied by benefits. From the studies carried out so far, and the extrapolation of their results to high penetration levels, it is clear that the integration of more than 20 per cent of wind power into the EU power system would be economically as well as environmentally beneficial.

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