Transmission congestion can cause a divergence between wholesale power prices at the individual pricing nodes where power is generated and the more-liquid trading hubs where that power is often delivered and sold. This nodal price difference is commonly referred to as the {\textquotedblleft}locational basis{\textquotedblright} (or just {\textquotedblleft}basis{\textquotedblright}). Because the basis varies over time, it can{\textemdash}if not hedged{\textemdash}unpredictably affect a wind plant{\textquoteright}s revenue and/or value, which increases investor risk and potentially slows deployment. We find wind plants typically face a larger and more-negative basis than do thermal generators, and hence are more-negatively impacted by congestion. Moreover, while most thermal generators can effectively hedge basis risk by purchasing conventional fixed-volume financial transmission rights (FTRs), these fixed-volume FTRs do not effectively hedge basis risk for variable wind generation. More-effective hedging mechanisms may be required to support those generators most-impacted by congestion, and to promote continued investment in variable generation resources in congested markets.
}, year = {2023}, booktitle = {The Energy Journal}, journal = {The Energy Journal}, series = {The Energy Journal}, volume = {44}, month = {01/2023}, url = {https://www.iaee.org/en/publications/ejarticle.aspx?id=4076}, doi = {https://doi.org/10.5547/01956574.44.6.jkim}, note = {An open-access version of this article published in The Energy Journal can be downloaded here. A brief overview of this research can be read here.\
A webinar recorded on February 7, 2023, discussing this research can be viewed here.\
}, language = {eng}, }