Association Webinars: Valuation of the Locational Merit and Benefits of Diversification of Onshore Wind Power



This webinar will present an econometric analysis of curtailment costs of renewable energy sources (RES) in Germany. The study aims at explaining and quantifying the regional variability of RES curtailment, which is a measure to relieve grid overstress by temporarily disconnecting RES from the electricity grid. We apply a Heckit sample selection model, which corrects bias from non-randomly selected samples. The selection equation estimates the probability of occurrence of RES curtailment in a region. The outcome equation corrects for cross-sectional dependence and quantifies the effect of RES on curtailment costs. The results show that wind energy systems connected to the distribution grid increase RES curtailment costs by 0.7% per MW or, respectively, 0.2% per GWh, in subregions that have experienced RES curtailment over the period 2015-2017. The implication of this finding is that policymakers should set price signals for renewables that consider the regional grid overstress, in order to mitigate the cost burden on consumers due to excess generation from RES.

Literature indicates a decline in the market value of wind power with increasing market penetration. Two promising measures to mitigate this market value drop are system friendly turbines and geographical diversification. This study analyzes the combined potential of this hybrid approach to improve market values, reduce system costs and the overall subsidy need in Germany. Therefore, promising diversification regions and site optimal turbine configurations are identified. The corresponding market values and levelized cost of electricity (LCOE) are forecasted for penetration rates of up to 65% (2030). The analysis shows that the market value drop in diversified regions using system friendly turbines is less severe. Furthermore, the hybrid approach results in system cost and subsidy savings. Yet additional analyses show that the dominant share of the hybrid approach benefits can be attributed to the use of system friendly turbines and that diversification does not seem to be a promising alternative for Germany.


Tim Höfer, MSc, School of Business and Economics / E.ON Energy Research Center, RWTH Aachen University
Tim Höfer studied Business Administration and Civil Engineering at RWTH Aachen University. For the last five years, he has been a member of the research staff and PhD candidate at the Institute for Future Energy Consumer Needs and Behavior (FCN) at at RWTH's interdisciplinary and integrated E.ON Energy Research Center (E.ON ERC). His research focuses on socio-economic aspects of the energy transition. His research interests include (spatial) econometric models and decision-making methods.

Reinhard Madlener, Prof. Dr, School of Business and Economics / E.ON Energy Research Center, RWTH Aachen University
Reinhard Madlener is full professor of energy economics and management at the School of Business & Economics, RWTH Aachen University, Germany, and the founding and current director of the FCN institute at E.ON ERC. His research fields are energy economics and policy, sustainable energy transition, technological diffusion, and investment under uncertainty. He is adjunct professor with NTNU Trondheim and Vice-President of the Swiss Association for Energy Economics.


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