The challenges for fossil fuel power system associated with integration of large scale renewable generation

This paper presents the challenges that are associated with the integration of wind power into the power systems based on fossil-fuel generation. These challenges include indirect effects associated with international trade and the development of the generation mix in the neighbouring countries. LCOE, that is widely used due to simplicity and possibility to compare the unit costs of different technologies over their economic life alone do not provide information of profitability or competitiveness of power plant. The economic evaluation of any power generating technology should be complemented by its market value as the interaction between regions can have strong effect on the generation costs. It was proposed to analyse the influence of different share of RES, different level of CO
₂
prices on electricity export, import prices and generation cost of Estonian power plants. The expression of import, export prices provide important information of power system operation effects on power plants generation costs. This can be used for estimation of cost-optimal and competitive penetration level of RES for designing of cost-efficient power system to policy makers and investors. The main conclusion is that the more RES capacity in the system, the higher will be difference between export and import electricity prices. The stronger CO
₂
policy will be, the higher will be profit for RES technologies and less for conventional power plants and the more needs for subsidies for base load and regulation power plants. In addition, the paper presents the interrelations between integrated RES capacity, CO
₂
price, electricity market price and LCOE.