Opportunity-cost-pricing of reserves for a simple hydropower system

Abstract

This work investigates the cost of delivering different types of balancing reserves from a simple hydropower reservoir system. In addition to delivering energy, the fast ramping characteristics of hydropower units makes them suitable for delivery of various balancing products that are needed in order to maintain system security. The price at which these products are offered is determined by the opportunity costs in the day-ahead energy market. In a small case study, these opportunity costs are assessed by analyzing the changes from the optimal day-ahead production schedule for various types and volumes of reserve delivery commitments. We find that the requirement of delivering spinning reserves may significantly restrict the production schedule. This type of balancing service is thus found to be costly in our analysis. The special restriction of symmetric up and down regulation for primary reserves also makes this type of service more expensive as the solution space is even more restrained.