AbstractThe key question in hydropower production is the time pattern of the use of the water in the reservoir. The water used to produce electricity today can alternatively be used tomorrow. The analysis of the operation of hydropower is therefore essentially a dynamic one. The paper introduces some basic models for social allocation of stored water over discrete time periods using non-linear programming assuming capacities of generation and transmission as given. Implications of constraints such as limited storage capacity and limited connector capacity for (international) trade are studied. Results are derived for water allocation and development of the electricity price over time. Graphical illustrations are provided in the two- period case and successive pairs of periods in a multi-period setting by means of the bathtub diagram. Thermal capacity is added to hydro and the optimal mix is studied. The walls of the hydro bathtub are extended endogenously by thermal capacities. Finally, the case of monopoly is studied.Different from standard monopoly behaviour of contracting output, if total available water is to be used, the strategy of a monopolist is to redistribute the use of water for electricity production over periods compared with the social optimal distribution.
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Bibliographic InfoPaper provided by Oslo University, Department of Economics in its series Memorandum with number 30/2005.
Length: 50 pages
Date of creation: 21 Nov 2005
Date of revision:
Publication status: Published as the book Hydropower Economics, 2007, Springer .
Contact details of provider:
Postal: Department of Economics, University of Oslo, P.O Box 1095 Blindern, N-0317 Oslo, Norway
Phone: 22 85 51 27
Fax: 22 85 50 35
Web page: http://www.oekonomi.uio.no/indexe.html
More information through EDIRC
Hydropower; electricity; reservoir; water value; monopoly;
Find related papers by JEL classification:
- D42 - Microeconomics - - Market Structure and Pricing - - - Monopoly
- L95 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Gas Utilities; Pipelines; Water Utilities
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