Market induced curtailment of wind power

Wind power is an inherently variable source of energy. In this paper, we explore how a wind power producer - offering its power in a two-settlement market for energy - might leverage power curtailment capability to mitigate financial risk in the face of uncertain production and imbalance prices. In particular, we identify conditions on imbalance prices that would induce voluntary curtailment of output and analytically quantify the economic benefit derived from said curtailment as an explicit function of the expected imbalance prices. Finally, we compute empirical estimates of this improvement in expected profit using price data from the NYISO and MISO.