主题: Wind Power Expansion and Regional Allocative Efficiency among Fossil-fuel Electricity Generators
Integrating wind power incurs more incidences of transmission congestion and demands more generation fleet flexibility, which may impose a negative effect on how efficiently regional production is allocated (we call it “regional allocative efficiency”) among fossil fuel electricity generators. Exploring exogenous variations in wind power generation conditional on wind turbine capacity, we analyze wind-induced allocative efficiency loss by comparing the average cost sensitivity of fossil fuel unit utilization in a US regional electricity market between periods of different wind generation levels. Results show that the utilization of fossil fuel power generators become less sensitive to their costs as the share of wind power increases. This effect is more pronounced when wind power generation is more volatile and when transmission capacity is less sufficient. The back-of-envelope calculation based on our empirical findings suggests that such private inefficiency cost is nontrivial: taking it into account would increase the levelized cost of wind energy (LCOE) by $12/MWh, amounting to approximately 17% of the traditional estimates. Further incorporating the social damage of carbon dioxide in the calculation implies that the privately inefficient substitution from cheap coal to expensive gas units instead brings a net social benefit; nonetheless, our estimated private cost is still policy-relevant since it is a local burden while the carbon abatement benefit is shared globally.
Haoyang Li is an assistant professor at the Institute for Advanced Research of Shanghai University of Finance and Economics. He earned his PhD degree in 2019 from Michigan State University, where he specialized in Economics and Environmental Science and Public Policy. His research focuses on environmental and resource economics, agricultural economics and applied micro/econometrics. His research has been financially supported by the National Natural Science Foundation of China and published in journals such as American Journal of Agricultural Economics, Journal of Environmental Economics and Management, Journal of the Association of Environmental and Resource Economists,and Resources, Conservation & Recycling.