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Additional Balancing and Network Costs

Additional Balancing Costs

Additional balancing requirements in a system depend on a whole range of factors, including:

  • The level of wind power penetration in the system, as well as the characteristic load variations and the pattern of demand compared with wind power variations;
  • Geographical aspects, such as the size of the balancing area, geographical spread of wind power sites and aggregation;
  • The type and marginal costs of reserve plants (such as fossil and hydro);
  • Costs and characteristics of other mitigating options present in the system, such as storage;
  • The possibility of exchanging power with neighbouring countries via interconnectors; and
  • The operational routines of the power system, for example, how often the forecasts of load and wind energy are updated (gate-closure times) and the accuracy, performance and quality of the wind power forecast system used.

At wind energy penetrations of up to 20 per cent of the gross demand, system operating cost increases by about 1 to 4 €/MWh of wind generation. This is typically 10 or less of the wholesale value of wind energy.

Figure 7.1 illustrates the costs from several studies as a function of wind power penetration. Balancing costs increase on a linear basis with wind power penetration; the absolute values are moderate and always less than 4 €/MWh at 20per cent level (and more often in the range below 2 €/MWh).


Figure 7.1: Estimates for the Increase in Balancing and Operating Costs due to Wind Power

Figure 7.1: Results from estimates for the increase in balancing and operating costs, due to wind power (Holttinen, 2007). Note: The currency conversion used in this figure is 1 € = 0.7 GBP = 1.3 USD. For the UK 2007 study, the average cost is presented; the range for 20 penetration level is from 2.6 to 4.7 €/MWh.

Source: Holttinen, 2007

Note: The currency conversion used in this figure is 1 € = 0.7 GBP = 1.3 USD. For the UK 2007 study, the average cost is presented; the range for 20 penetration level is from 2.6 to 4.7 €/MWh.


There are several major contributing factors to lower balancing costs.

  • Larger areas: Large balancing areas offer the benefits of lower variability. They also help decrease the forecast errors of wind power, and thus reduce the amount of unforeseen imbalance. Large areas favour the pooling of more cost-effective balancing resources. In this respect, the regional aggregation of power markets in Europe is expected to improve the economics of wind energy integration. Additional and better interconnection is the key to enlarging balancing areas. Certainly, improved interconnection will bring benefits for wind power integration, and these are presently quantified by studies such as TradeWind.
  • Reducing gate-closure times: This means operating the power system close to the delivery hour. For example, a re-dispatch, based on a 4–6 hour forecast update, would lower the costs of integrating wind power, compared to scheduling based on only day-ahead forecasts. In this respect, the emergence of intra-day markets is good news for the wind energy sector.
  • Improving the efficiency of the forecast systems: Balancing costs could be decreased if the wind forecasts could be improved, leaving only small deviations to the rest of the power system. Experience in different countries (Germany, Spain and Ireland) has shown that the accuracy of the forecast can be improved in several ways, ranging from improvements in meteorological data supply, to the use of ensemble predictions and combined forecasting. In this context, the forecast quality is being improved by making a balanced combination of different data sources and methods in the prediction process.
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