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

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  • Mauritzen, Johannes

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    (Research Institute of Industrial Economics (IFN))

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    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. In this paper I use simple distributed lag models with data from Denmark and Norway. I find that increased wind power in Denmark causes increased marginal exports to Norway and that this effect is larger during periods of net exports when it is difficult to displace local production. Increased wind power can also be shown to slightly reduce prices in southern Norway in the short run. Finally, I estimate that as much as 40 percent of wind power produced in Denmark is stored in Norwegian hydro power magazines.

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    Bibliographic Info

    Paper provided by Research Institute of Industrial Economics in its series Working Paper Series with number 908.

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    Length: 34 pages
    Date of creation: 27 Mar 2012
    Date of revision:
    Handle: RePEc:hhs:iuiwop:0908

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    Related research

    Keywords: Wind Power; Hydro Power; Nordic Electricity Market; Empirical;

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    References

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    1. Richard Green and Nicholas Vasilakos, 2012. "Storing Wind for a Rainy Day: What Kind of Electricity Does Denmark Export?," The Energy Journal, International Association for Energy Economics, vol. 0(Number 3).
    2. Newbery, David, 2010. "Market design for a large share of wind power," Energy Policy, Elsevier, vol. 38(7), pages 3131-3134, July.
    3. Belanger, Camille & Gagnon, Luc, 2002. "Adding wind energy to hydropower," Energy Policy, Elsevier, vol. 30(14), pages 1279-1284, November.
    4. Försund, Finn & Hjalmarsson, Lennart, 2010. "Renewable Energy Expansion and the Value of Balance Regulation Power," Working Papers in Economics 441, University of Gothenburg, Department of Economics.
    5. Weigt, Hannes & Hirschhausen, Christian von, 2008. "Price formation and market power in the German wholesale electricity market in 2006," Energy Policy, Elsevier, vol. 36(11), pages 4227-4234, November.
    6. Rafal Weron, 2006. "Modeling and Forecasting Electricity Loads and Prices: A Statistical Approach," HSC Books, Hugo Steinhaus Center, Wroclaw University of Technology, number hsbook0601.
    7. Amundsen, Eirik S. & Bergman, Lars, 2006. "Why has the Nordic electricity market worked so well?," Utilities Policy, Elsevier, vol. 14(3), pages 148-157, September.
    8. Benitez, Liliana E. & Benitez, Pablo C. & van Kooten, G. Cornelis, 2008. "The economics of wind power with energy storage," Energy Economics, Elsevier, vol. 30(4), pages 1973-1989, July.
    9. Hjalmarsson, Erik, 2000. "Nord Pool: A Power Market Without Market Power," Working Papers in Economics 28, University of Gothenburg, Department of Economics.
    10. Mauritzen, Johannes, 2011. "What Happens When it's Windy in Denmark? An Empirical Analysis of Wind Power on Price Variability in the Nordic Electricity Market," Working Paper Series 889, Research Institute of Industrial Economics.
    11. Twomey, Paul & Neuhoff, Karsten, 2010. "Wind power and market power in competitive markets," Energy Policy, Elsevier, vol. 38(7), pages 3198-3210, July.
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