Quantifying the value that wind power provides as a hedge against volatile natural gas prices

Conference · Fri May 31 04:00:00 EDT 2002

OSTI ID:827949

Bolinger, Mark ^[1]; Wiser, Ryan; Golove, William

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1. LBNL Library

Advocates of renewable energy have long argued that wind power and other renewable technologies can mitigate fuel price risk within a resource portfolio. Such arguments--made with renewed vigor in the wake of unprecedented natural gas price volatility during the winter of 2000/2001--have mostly been qualitative in nature, however, with few attempts to actually quantify the price stability benefit that wind and other renewables provide. This paper attempts to quantify this benefit by equating it with the cost of achieving price stability through other means, particularly gas-based financial derivatives (futures and swaps). We find that over the past two years, natural gas consumers have had to pay a premium of roughly 0.50 cents/kWh over expected spot prices to lock in natural gas prices for the next 10 years. This incremental cost is potentially large enough to tip the scales away from new investments in natural gasfired generation and in favor of investments in wind power and other renewable technologies.

• Research Organization: Ernest Orlando Lawrence Berkeley National Laboratory, Berkeley, CA (US)
• Sponsoring Organization: USDOE. Assistant Secretary for Energy Efficiency and Renewable Energy. Solar Energy Technology Program. Office of Power Technologies (US)
• DOE Contract Number: AC03-76SF00098
• OSTI ID: 827949
• Report Number(s): LBNL--50484
• Country of Publication: United States
• Language: English

Related Subjects

03 NATURAL GAS
17 WIND ENERGY
NATURAL GAS
PRICES
STABILITY
VOLATILITY
WIND POWER