The impacts of transmission congestion and network investment on the development of
the Australian wind energy industry have received growing attention from wind farm
developers as well as relevant policy stakeholders such as the Australian Energy Market Commission (AEMC).
There are many potential wind farm sites across the country with excellent wind
regimes yet only limited transmission capacity. At least one wind farm in South
Australia has spent a period following construction where its output was curtailed by transmission constraints (NEMMCO, 2009). Current market rules do not guarantee
dispatch to an existing wind farm as more wind generation connects to the same
transmission. Given the expense of transmission network extension and augmentation, there are interesting questions of what economic impacts such constraints might have for wind farm operators.
This paper examines this issue in the context of the South Australian region of the
Australian National Electricity Market (NEM). The State currently hosts almost half of total Australian wind generation capacity and has significant transmission capacity
limitations for further development. Half hour wholesale electricity spot prices were
used along with generation data from nine South Australian wind farms over the 2008-9
and 2009-10 financial years to assess the potential impact that transmission constraints might have had on wind farm revenue. Results showed that a number of the wind farms would have suffered only very limited revenue reductions from having significantly greater wind farm capacity than the rating of their transmission connection to the NEM. Importantly, some wind farms could be limited to a maximum power output of half their rated capacity and still achieve higher capacity factors then other already existing unconstrained wind farms.
The key reasons for this are that wind farms do not generate at rated capacity for a great
deal of the time over the year, periods of high wind generation appear to be associated
with lower wholesale prices and there is significant variance between the wind farms
capacity factors. Our findings suggest that there may be circumstances where wind farm
developers might benefit from installing more wind turbines than the capacity of their
transmission connection