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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

    () (Dept. of Finance and Management Science, Norwegian School of Economics and Business Administration)

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.

Suggested Citation

  • Mauritzen, Johannes, 2011. "Dead Battery? Wind Power, The Spot Market, and Hydro Power Interaction in the Nordic Electricity Market," Discussion Papers 2011/16, Norwegian School of Economics, Department of Business and Management Science.
  • Handle: RePEc:hhs:nhhfms:2011_016
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    File URL: http://hdl.handle.net/11250/164180
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    References listed on IDEAS

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    1. 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.
    2. Mauritzen, Johannes, 2010. "What happens when it's Windy in Denmark? An Empirical Analysis of Wind Power on Price Volatility in the Nordic Electricity Market," Discussion Papers 2010/18, Norwegian School of Economics, Department of Business and Management Science.
    3. Belanger, Camille & Gagnon, Luc, 2002. "Adding wind energy to hydropower," Energy Policy, Elsevier, vol. 30(14), pages 1279-1284, November.
    4. Fell, Harrison, 2008. "EU-ETS and Nordic Electricity: A CVAR Approach," Discussion Papers dp-08-31, Resources For the Future.
    5. Denault, Michel & Dupuis, Debbie & Couture-Cardinal, Sébastien, 2009. "Complementarity of hydro and wind power: Improving the risk profile of energy inflows," Energy Policy, Elsevier, vol. 37(12), pages 5376-5384, December.
    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. 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.
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    More about this item

    Keywords

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

    JEL classification:

    • Q00 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - General - - - General

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