Flexible Demand and Flexible Supply As Enablers of Variable Energy Integration

51 Pages Posted: 11 May 2017  

Hannu Huuki

University of Oulu - Department of Economics; Government of the Republic of Finland - Finnish Environment Institute

Santtu Karhinen

Government of the Republic of Finland - Finnish Environment Institute; University of Oulu - Department of Economics

Maria Kopsakangas-Savolainen

Finnish Environment Institute; University of Oulu - Department of Economics; Martti Ahtisaari Institute

Rauli Svento

University of Oulu - Department of Economics

Date Written: May 10, 2017

Abstract

This paper analyzes the impact of interplay between demand response, wind penetration and hydropower usage in the hydro-dominated Nordic power market. Hydropower and demand response are considered as complements of wind power. This paper is the first to quantify the benefits from simultaneously optimizing demand response and energy storage when integrating wind power into an existing power system. Our results show that coordinating wind and hydropower productions is beneficial. Furthermore, this coordination becomes more efficient with more flexible demand. As results, thermal power capacity and emissions are reduced considerably since thermal capacity utilization is improved. Although wind power lowers the market prices, the resulting decreasing profits for non-wind producers may be compensated by promoting more flexible electricity demand. Thus, a part of the benefits for consumers may be shifted back to non-wind producers. Lastly, we show decreasing marginal system benefit from increasing real-time pricing adoption.

Keywords: variable renewable energy, flexibility, hydropower

JEL Classification: L94, C61, D22

Suggested Citation

Huuki, Hannu and Karhinen, Santtu and Kopsakangas-Savolainen, Maria and Svento, Rauli, Flexible Demand and Flexible Supply As Enablers of Variable Energy Integration (May 10, 2017). Available at SSRN: https://ssrn.com/abstract=2966053 or http://dx.doi.org/10.2139/ssrn.2966053

Hannu Huuki

University of Oulu - Department of Economics ( email )

PO Box 4600
FIN-90014 University of Oulu
Finland

Government of the Republic of Finland - Finnish Environment Institute ( email )

00260 Helsinki
Finland

Santtu Karhinen

Government of the Republic of Finland - Finnish Environment Institute ( email )

00260 Helsinki
Finland

University of Oulu - Department of Economics ( email )

PO Box 4600
FIN-90014 University of Oulu
Finland

Maria Kopsakangas-Savolainen (Contact Author)

Finnish Environment Institute ( email )

PO Box 413
Oulu, 90014
Finland

University of Oulu - Department of Economics ( email )

PO Box 4600
FIN-90014 University of Oulu
Finland

Martti Ahtisaari Institute ( email )

Oulu
Finland

Rauli Svento

University of Oulu - Department of Economics ( email )

PO Box 4600
FIN-90014 University of Oulu
Finland

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