The Impact of Wind Power on European Natural Gas Markets

The Impact of Wind Power on European Natural Gas Markets

Executive Summary

• Author: Irene Vos, Gas Analyst at the International Energy Agency (IEA)
• Acknowledgements: Thanks to various contributors and reviewers, including Anne-Sophie Corbeau, Alexander Antonyuk, Moritz Paulus, Robert Arnot, Hugo Chandler, Carlos Gasco, Laszlo Varro, Didier Houssin, Doug Cooke, Gerard Martinus, Janet Pape, Marilyn Smith, Angela Gosmann, Corinne Hayworth, and Bertrand Sadin.

Introduction

• Background: The paper explores the impact of wind power on European natural gas markets.
• Objective: To understand how wind power influences the European energy landscape, particularly in relation to natural gas.

Background: Wind Power on the Rise

• Global Perspective:
  • Wind in the World: Increasing globally.
  • Europe: Significant growth in wind power capacity.
  • North America: Rapid expansion.
  • Asia: Fast-growing market.
• Future Growth: According to the World Energy Outlook 2010 (WEO 2010).

Wind as a Source of Electricity

• Supply-Derived: Wind power's contribution to electricity generation.
• Capacity Factor: Average output over time.
• Variability and Geographic Diversification: Importance of spreading wind farms across different regions to manage variability.
• Ramping Speeds: How quickly wind output can change.
• Predictability: Challenges in predicting wind power output.

Managing Variability: Supply-Side Response

• European Generation Mix: Current composition and potential changes.
• Technical Capabilities: Methods to manage variability, such as start-up times and costs.
• Ramping Rate: Ability to adjust generation quickly.
• Minimum Stable Generation: Ensuring consistent output levels.

Costs and Economics

• Short-Term Marginal Costs: Costs associated with adjusting generation.
• Levelised Costs of Electricity: Total costs per unit of electricity generated.

Impact on Electricity Demand

• Residual Demand Characteristics: Nature of remaining demand after accounting for wind power.
• Load Duration Curve: Pattern of electricity demand over time.
• Fuel Flexibility: Ability of other fuels to adjust to changes in wind output.
• Demand Spread: Increased variability in demand.
• Predictability: Decreased predictability due to wind's variability.

The Effect of Wind Power on Gas Markets

• Interaction Between Wind Output and Gas Demand: Relationship between wind and gas consumption.
• Gas Markets: Dynamics of gas markets in the power sector.
• Capacity Factor of Gas-Fired Capacity: Declining capacity factor.
• Impact on Gas Demand: Variability in gas demand and utilization of transport capacity.
• Natural Gas Spot Prices: Increased variability.
• Geographical Diversification: Enhanced effect of geographic diversity.

Abbreviations and Acronyms

• List of abbreviations and acronyms used in the report.

References

• Detailed list of references cited in the report.