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: Suggested Citation
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