Measuring the Impact of Wind Power and Intermittency

Wind power is crucial to decarbonizing electricity markets but is intermittent, which complicates operational management. We assess the welfare impact of wind power on the Spanish electricity market during the years 2009-2018. We estimate modest adverse effects of wind intermittency on operational costs, even at relatively high levels of wind generation. We examine a policy change that shifted output-based wind subsidies to capacity-based subsidies. We find that capacity-based subsidies improved market operations, leading to a reduction in the costs of intermittency. This finding suggests that improved incentive design can diminish the negative impacts of wind intermittency