The effects of stochastic market clearing on the cost of wind integration: a case of New Zealand electricity market

Introducing wind generation into an electricity market can incur an extra cost resulting from the volatile nature of wind. To reduce this cost, an alternative stochastic market clearing mechanism is proposed in the literature (Wong and Fuller in IEEE Trans Power Syst 22(2):631–638, 2007; Pritchard et al. in Oper Res 2010; Bouffard et al. in IEEE Trans Power Syst 20(4):1818–1826, 2005). However, implementing a stochastic market clearing can also impose some extra cost on the market. Therefore, it is essential to estimate the efficiency gain resulting from implementing a stochastic market clearing mechanism. We describe the result of an empirical study to quantify value of a stochastic clearing mechanism for the New Zealand electricity market. We extend our analysis for possible larger wind integration in the future.