British electricity TSO challenged to improve wind power forecasts
Britain's energy regulator, Ofgem, is to call on the country's electricity transmission system operator (TSO) National Grid to improve its wind power generation predictions while raising from one to two the number of Day-ahead forecasts it makes available to the market on an intra-day basis.
The approach was outlined in a consultation on electricity-system operator incentives published by the regulator on Wednesday. The incentive model will cover a two-year period beginning on 1 April.
Ofgem said it favours an approach under which National Grid will be given a financial incentive to accurately forecast wind power production based on a mean absolute error output index.
That means that no consideration will be paid to whether the estimate is too high or too low - only the margin of error will be important in the accuracy calculation.
Stringent expectations
The regulator wants National Grid to aim for a maximum margin of error of 6.25% next winter, with the margin falling to 6% in winter 2014/15.
Its expectation for the accuracy of summer forecasts is more stringent, specifying an acceptable error margin of just 4.75% this summer, falling to 4.5% next year.
The proposed 2014/15 winter target is 0.5 percentage points higher than that suggested by Ofgem last July, a factor it said "will provide a fairer balance between the incentive to improve performance and the ability of the SO [system operator] to gain from the scheme". Ofgem said it based its more rigorous figure on the performance of National Grid's wind power forecasts during the past 18 months.
Significant impact
The impact that wind power exerts on intra-day markets and the effect that wind power forecasts exert on day-ahead markets have both grown exponentially as the sector's UK installed capacity has increased.
"Two, two-and-a-half years ago, no one cared about the wind," one UK-based prompt trader said on Thursday.
"Now, and at least since last year, it's having a significant impact."
Daily metered wind output volumes hit a high of 113GWh on 4 February, according to data from balancing services company ELEXON that was published by National Grid.
The lowest daily volume since the start of this year was 6GWh, on 3 March. The gaping 107GWh spread offers an indication of the extreme volatility that prompt traders must try to predict from day to day.
The inverse relationship between Day-ahead power prices and wind power generation volumes on the day of the contract's delivery is clear (see graph), with power prices generally settling higher at times of low wind production, underscoring the value of regular and accurate forecasting to prompt traders.
At the end of 2011, the impact of wind began to have a visible influence on curve prices for the first time (see EDEM 14 December 2011).
Ofgem's consultation is open for response until 5 April, although the two-year period in which its decisions will take effect begins on 1 April. Jamie Stewart
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