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Abstract In this paper a stochastic fundamental electricity market model is applied to estimate the integration costs of wind due to changed system operation and investments in Germany. The model's principle is cost minimization by determining the system costs mainly as a function of available generation and transmission capacities, primary energy prices, plant characteristics, and electricity demand. To obtain appropriate estimates of the integration costs notably reduced efficiencies at part load and start‐up costs are taken into account. The intermittency of wind is covered by a stochastic recombining tree and the system is considered to adapt on increasing wind integration over time by endogenous modeling of reserve requirements and investments in thermal power plants. The results highlight the need for stochastic optimization models and the strong dependency on the actual system and its development over time to get sufficient estimates of the integration costs of wind's intermittency. Copyright © 2006 John Wiley & Sons, Ltd.
Swider et al. (2006) studied this question.