An Operating Model and Economic Analysis for Integrating Wind Electric Power in Manufacturing

Abstract

Among the renewable sources of generating electricity, wind power costs less to produce and produces fewer CO2 emissions. In addition, the Department of Energy (DOE) has stated that wind power should provide 20% of U.S. electricity by 2030. These make wind power a very promising investment for the next two decades. Investment in wind power is an opportunity not just for power producers but for manufacturing facilities as well. However, integrating wind electric power into the existing power system network is still questionable due to the variability of wind power output. Since the government offers tax incentives such as the federal production tax credit, the cost disadvantage could be overcome, and wind energy investment could be profitable. In addition to offsetting costs through a tax credit, a manufacturing facility investing in wind turbines can help to reduce its energy costs whether it self-generates part of its energy consumption or sells the surplus electric power generated by the wind turbines into the power market. In order to invest in wind power, facilities need an economic analysis of wind energy investment under real-time pricing, and this dissertation develops a system operating model for a manufacturing facility that represents the interaction between a manufacturing facility’s energy usage and a power network system. Two system operating models and economic analysis formulations of wind farm investment are introduced. The first System Operating model (SO-A), ii using mathematical programming with complementarity constraints (MPCC) approach, represents operations more accurately but is inconvenient to use in a long-term study. The second System Operating model (SO-B), using the interrelated linear programming (LP) technique, is developed to overcome the SO-A’s disadvantages and is easier to solve, so it is better for a long-term study. However, the outputs of the SO-B are inaccurate. Therefore, correction models are then constructed to adjust the differences between the outputs of the two models. Wind farm investment formulations for different scenarios are also formulated for an economic analysis. The models are tested using a 5-Bus, 4-Generator Power System. Using this power system, 2 wind farms, and 2 manufacturing facilities, the results show that wind power investment provides economic benefits to the manufacturing facilities in either purchasing or generating part of their energy using wind power. Investing in a wind farm project is preferable for the manufacturing facility in terms of the annual equivalent cost reduction. For the power generating company, including wind power in the power network results in reducing the company’s annual profit. If the power system must include a wind farm, then the best alternative for the power generating company is to own the wind farm.