Improperly designed subsidies to wind power raised balancing costs

Johannes Mauritzen examines Danish wind power for the period 2010-2012 and reveals that wind power producers covered production deficits by increased participation at the short term market, Elbas, while production surpluses led to less market participation. A probable explanation was a subsidy scheme that weakened the incentive for owners of wind power plants to compensate production surpluses on the short-term market. Instead, the system operator had to intervene to balance power supply. The problem of surplus wind power production diminished when the subsidies were phased out during late 2012.