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Rethinking the Role of Financial Transmission Rights in Wind-Rich Electricity Markets in the Central U.S.

Journal Article · · Energy Journal
 [1];  [1];  [1];  [1]
  1. Lawrence Berkeley National Laboratory (LBNL), Berkeley, CA (United States)
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Transmission congestion can cause a divergence between wholesale power prices at the individual pricing nodes where power is generated and the more-liquid trading hubs where that power is often delivered and sold. This nodal price difference is commonly referred to as the “locational basis” (or just “basis”). Because the basis varies over time, it can—if not hedged—unpredictably affect a wind plant’s revenue and/or value, which increases investor risk and potentially slows deployment. We find wind plants typically face a larger and more-negative basis than do thermal generators, and hence are more-negatively impacted by congestion. Moreover, while most thermal generators can effectively hedge basis risk by purchasing conventional fixed-volume financial transmission rights (FTRs), these fixed-volume FTRs do not effectively hedge basis risk for variable wind generation. More-effective hedging mechanisms may be required to support those generators most-impacted by congestion, and to promote continued investment in variable generation resources in congested markets.
Research Organization:
Lawrence Berkeley National Laboratory (LBNL), Berkeley, CA (United States)
Sponsoring Organization:
USDOE Office of Energy Efficiency and Renewable Energy (EERE); USDOE Office of Science (SC)
Grant/Contract Number:
AC02-05CH11231
OSTI ID:
2368550
Alternate ID(s):
OSTI ID: 2998478
Journal Information:
Energy Journal, Journal Name: Energy Journal Journal Issue: 6 Vol. 44; ISSN 0195-6574
Publisher:
International Association for Energy Economics (IAEE)Copyright Statement
Country of Publication:
United States
Language:
English

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Challenges of Obtaining Financial Transmission Rights for Wind Projects
  • Nimmagadda, Sandeep; Harral, Mark A.; Bayne, Stephen B.
  • Power and Energy / 807: Intelligent Systems and Control / 808: Technology for Education and Learning https://doi.org/10.2316/P.2013.806-026
conference January 2013

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17 WIND ENERGY
29 ENERGY PLANNING, POLICY, AND ECONOMY
basis risk
financial transmission rights
renewable energy