Wind Value in Hydropower Dominated Electricity Market

27 Pages Posted: 2 Apr 2018

See all articles by Hannu Huuki

Hannu Huuki

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

Date Written: March 27, 2018

Abstract

This paper studies the interaction between hydro and wind power in hydro-thermal-wind power system. Socially efficient and monopoly hydropower allocation solutions are presented. Market power utilization potential for hydropower is reduced during low demand periods when residual demand crosses the elastic part of thermal supply curve. Conversely, in high demand periods when the residual demand crosses the inelastic part of thermal supply curve, real potential for market power utilization exists.

Compared to thermal power systems, wind value factors are high as efficiently allocated hydropower buffers wind power shocks. Monopoly hydroallocation decreases wind power value and the gap to wind values under socially efficient hydropower widens as wind market share increases.

Keywords: hydropower allocation, wind value factor, thermal power utilization

JEL Classification: L94, Q42, Q41

Suggested Citation

Huuki, Hannu, Wind Value in Hydropower Dominated Electricity Market (March 27, 2018). Available at SSRN: https://ssrn.com/abstract=3151389 or http://dx.doi.org/10.2139/ssrn.3151389

Hannu Huuki (Contact Author)

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

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