In the United States, most wind power capacity has been deployed in the wind-rich central region. Transmission congestion within this large region causes spatial variation in wholesale power prices—called the basis—that can unpredictably reduce wind plant revenue and, hence, possibly slow deployment. We use historical pricing and generation data from three central U.S. markets to show that wind plants are more-susceptible than thermal generators to congestion-related basis risk. Moreover, while most thermal generators can effectively hedge any basis risk by purchasing conventional financial transmission rights (FTRs), these fixed-volume FTRs are not a good match for variable wind generation. More-effective hedging mechanisms—for example, an FTR whose volume varies with wind plant output—may be required to support those generators most-impacted by congestion, and to promote continued investment in variable generation resources in congested markets.

Speakers: James Hyungkwan Kim, Ryan Wiser, and Mark Bolinger

James Hyungkwan Kim is an Energy Policy Project Scientist in the Electricity Markets and Policy Department at Lawrence Berkeley National Laboratory. He conducts research on the value and costs of power system technologies and related market policy as well as develops methods to estimate dispatch of flexible resources in response to grid needs. James has published his research in Applied Energy, Energy Research & Social Science, and IEEE Proceedings among other outlets. Prior to joining the lab, James worked in the U.S as an energy economist and trader at Tenaska Power Services, and energy policy researcher at Indiana State Utility Forecasting Group. Internationally, James worked in the United Nations Environment Programme in Geneva for Finance Initiative, ASEAN summit focused on energy issues, investment banking for green finance, and management consultancy for sustainable businesses. James holds a Ph.D in Applied Economics from Purdue University; an M.S in Economics from Brunei University; and a B.A in Computer Science and Industrial Engineering from Yonsei University.

Ryan Wiser is a Senior Scientist in and Senior Advisor to the Electricity Markets and Policy Department at Lawrence Berkeley National Laboratory. Ryan helps lead a 40-person department that seeks to inform public and private decision making within the U.S. electricity sector through research on electric system planning, reliability and regulation as well as on energy efficiency, renewable energy, and demand response. Ryan specifically manages a research program on renewable electricity systems, including on the costs, benefits, impacts and market potential of renewable electricity sources; on electric grid operations and infrastructure impacts; on public acceptance and deployment barriers; and on the planning, design, and evaluation of renewable energy programs.

Mark Bolinger is a Research Scientist in the Electricity Markets and Policy Department at Lawrence Berkeley National Laboratory. Mark conducts research and analysis on renewable energy, with a focus on cost, benefit, and market analysis as well as renewable energy policy analysis and assistance.