Wind power and electricity markets - Wind Power Integration: Connection and System Operational Aspects - page 251

for the wind available, i.e. spilling wind . This may make economic sense in certain
circumstances. The more modern wind turbines/farms can control reactive power
and can participate in voltage control. Black-start capability is not possible for a
wind turbine as it depends on wind availability.
In a market of the bilateral type there is a perceived tendency to undervalue
wind power as operators find it difficult, economically and technically, to make
firm bilateral arrangements. Variable sources such as wind are penalised in the
balancing market because they are seen to be placing a burden on the system in
terms of extra provision of ancillary services such as regulation, reserve, etc. The
whole ancillary services market concept is poorly developed in comparison with
the energy market, and this is leading to concerns over reliability and lack of
incentives for power plant such as wind.
There is a very strong coupling between energy markets, balancing, capacity
mechanisms and ancillary services. If bilateral trading and/or a gross pool were
practical up to real time there would be no need for a balancing mechanism.
Reserves and capacity are closely related. If, for example, the TSO contracts for
reserve in advance over long periods of time, then this is effectively a capacity
mechanism. Reserves that are dispatched by the balancing mechanism are in the
form of energy. Therefore, great care must be taken when these terms are being
interpreted.

7.4 Support mechanisms

For wind to compete effectively with other sources of electricity, it is necessary that
its advantages, i.e. low emissions and security of supply, are rewarded and recog-
nised. This can be achieved by supporting wind generation directly or by penalising
conventional generation for harmful emissions. Direct support consists generally of
specific targets for renewable energy penetration. Indirect support aims to capture
the true costs of other forms of electricity production, e.g. the external cost of
emissions being represented in the cost of electricity generation from fossil-fuel
plant. Emission taxes, e.g. a carbon tax that penalises fossil fuels, would make
electricity more expensive and would give wind power and other renewable sources
a competitive advantage.
The United Kingdom has a system of renewable obligations certificates
(ROCs). ROCs are separate products from the electrical energy but are related
directly to the quantity of renewable electricity produced. Suppliers are obliged to
purchase a certain quantity of ROCs or face a penalty charge if they are short. The
penalty was originally set at £30/MWh and is index linked. The penalty charge
places a cap on the value of the certificates. As the number of certificates increases
with more renewable generation, a point will come where the supply equals
demand, after which the price of the certificates will collapse. Such a possibility
makes these types of mechanisms somewhat risky for investors. In order to address
this, the target increases with time. It was set at 5.5% for 2005/2006, rising to 12%
by 2013. The penalty revenue that is collected from suppliers who do not meet their