Profitability of a Hydro Power Producer Bidding in Multiple Markets - An Analysis of the Specific Case of Tokke-Vinje Hydro Power System

Abstract

The main topic of this project has been to study the production scheduling of a hydro power producer exposed to the day-ahead, balancing and capacity market. The objective was to find what profit the producer may achieve by strategically bid in the above mentioned markets.

A prototype model that undertakes this task has been developed by SINTEF Energy Research as a part of their project "Integrating Balancing Markets in Hydro Power Scheduling Methods". It is a multi-stage, multi-scenario, short-term deterministic model programmed in AMPL.

To examine the potential profit a producer may gain by participating in the balancing market, the model has been run with and without the balancing market included in the simulation. The simulations have shown that a hydro power producer increases the expected income by participating in the balancing market.

The model has been run with both Nordic and German day-ahead prices. The German day-ahead prices lead to even greater increase in profits when including the balancing market. The simulations have also benn done with higher price volatility, which resulted in a further increase in profits.

Simulations have been done with different amounts of reserved capacity in the capacity market, with measures to reduce risk and with implementation to enforce acceptable reservoir behavior. The possibility of gathering profits from the capacity market proved to be limited. However, this conclusion is based on the prices that have been seen since the market was introduced in 2014 and may change if the prices rise.