Dead Battery? Wind Power, The Spot Market, and Hydro Power Interaction in the Nordic Electricity Market

35 Pages Posted: 7 Oct 2011

Date Written: September 29, 2011

Abstract

It is well established within both the economics and power system engineering literature that hydro power can act as a complement to large amounts of intermittent energy. In particular, hydro power can act as a "battery" where large amounts of wind power are installed. This paper attempts to extend that literature by describing the effects of cross-border wind and hydro power interaction in a day-ahead "spot" market. I use simple econometric distributed lag models with data from the Nordic electricity market and a sample of Norwegian hydro power plants with water storage magazines. I suggest that wind power mainly affects prices in the hydro power area by way of shifting the shadow value of water. The empirical results support this view.

Keywords: Wind Power, Hydro Power, Nordic Electricity Market

JEL Classification: Q00

Suggested Citation

Mauritzen, Johannes, Dead Battery? Wind Power, The Spot Market, and Hydro Power Interaction in the Nordic Electricity Market (September 29, 2011). NHH Dept. of Finance & Management Science Discussion Paper No. 2011/16, Available at SSRN: https://ssrn.com/abstract=1940408 or http://dx.doi.org/10.2139/ssrn.1940408

Johannes Mauritzen (Contact Author)

NHH Norwegian School of Economics ( email )

Helleveien 30
Bergen, NO-5045
Norway