Decomposition and Simulation of Imbalance Costs for Intermittent Renewable Producers

Generation from intermittent renewable sources is characterized by forecast errors which lead to imbalance costs for the respective plants. Imbalance costs may constitute a significant cost position for the respective generators and could be subject to further increase in light of ambitious deployment of intermittent renewables in many European countries.This work decomposes the driving factors for imbalance costs, undertakes analysis of historical data for Austria, presents a modelling approach to simulate imbalance costs and provides an outlook on the potential development in Austria. The simulation approach is based on the stochastic computation of the total imbalance and the modelling of renewable forecast errors generated from random draws against historically observed imbalance prices. It is shown that imbalance costs for solar and wind generators are expected to rise alongside the respective capacity additions.