Modelling counter-intuitive effects on cost and air pollution from intermittent generation.

In this paper, we first present a market environment with a conventional two settlement mechanism. We show that when we add some wind generation to the system, the steady-state market conditions yield lower social and consumer welfare and higher use of fossil fuels. We also present results of a counterfactual stochastic settlement market which improves social and consumer welfare after the introduction of new intermittent generation. Thus, we conclude that the choice of market mechanism is a critical factor for capturing the benefits of large-scale wind integration. We also introduce a method to compute analytical equilibria of games in which the payoff functions of players depend on the optimal solution to an optimization problem with inequality constraints. [ABSTRACT FROM AUTHOR]