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

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  • Johannes Mauritzen

Abstract

It is well established within both the economics and power system engineering literature that hydropower can act as a complement to large amounts of intermittent energy. In particular hydropower 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 hydropower magazines.

Suggested Citation

  • Johannes Mauritzen, 2013. "Dead Battery? Wind Power, the Spot Market, and Hydropower Interaction in the Nordic Electricity Market," The Energy Journal, International Association for Energy Economics, vol. 0(Number 1).
    • Handle: RePEc:aen:journl:ej34-1-05
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    Cited by:

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    2. Henao, Felipe & Viteri, Juan P. & Rodríguez, Yeny & Gómez, Juan & Dyner, Isaac, 2020. "Annual and interannual complementarities of renewable energy sources in Colombia," Renewable and Sustainable Energy Reviews, Elsevier, vol. 134(C).
    3. Kyritsis, Evangelos & Andersson, Jonas & Serletis, Apostolos, 2017. "Electricity prices, large-scale renewable integration, and policy implications," Energy Policy, Elsevier, vol. 101(C), pages 550-560.
    4. Deman, Laureen & Boucher, Quentin, 2023. "Impact of renewable energy generation on power reserve energy demand," Energy Economics, Elsevier, vol. 128(C).
    5. Hosius, Emil & Seebaß, Johann V. & Wacker, Benjamin & Schlüter, Jan Chr., 2023. "The impact of offshore wind energy on Northern European wholesale electricity prices," Applied Energy, Elsevier, vol. 341(C).
    6. Tselika, Kyriaki, 2022. "The impact of variable renewables on the distribution of hourly electricity prices and their variability: A panel approach," Energy Economics, Elsevier, vol. 113(C).
    7. Mehtap Kilic & Elisa Trujillo-Baute, 2014. "The stabilizing effect of hydro reservoir levels on intraday power prices under wind forecast errors," Working Papers 2014/30, Institut d'Economia de Barcelona (IEB).
    8. François, B. & Borga, M. & Creutin, J.D. & Hingray, B. & Raynaud, D. & Sauterleute, J.F., 2016. "Complementarity between solar and hydro power: Sensitivity study to climate characteristics in Northern-Italy," Renewable Energy, Elsevier, vol. 86(C), pages 543-553.
    9. Gianfreda, Angelica & Ravazzolo, Francesco & Rossini, Luca, 2020. "Comparing the forecasting performances of linear models for electricity prices with high RES penetration," International Journal of Forecasting, Elsevier, vol. 36(3), pages 974-986.
    10. Angelica, Gianfreda & Lucia, Parisio & Matteo, Pelagatti, 2017. "The RES-induced Switching Effect Across Fossil Fuels: An Analysis of the Italian Day-Ahead and Balancing Prices and Their Connected Costs," Working Papers 360, University of Milano-Bicocca, Department of Economics, revised 03 Feb 2017.
    11. Angelica Gianfreda & Derek Bunn, 2018. "A Stochastic Latent Moment Model for Electricity Price Formation," BEMPS - Bozen Economics & Management Paper Series BEMPS46, Faculty of Economics and Management at the Free University of Bozen.
    12. Tommi Ekholm & Vilma Virasjoki, 2021. "Pricing and Competition with 100% Variable Renewable Energy and Storage," The Energy Journal, , vol. 42(1_suppl), pages 1-18, June.
    13. Mulder, Machiel & Scholtens, Bert, 2013. "The impact of renewable energy on electricity prices in the Netherlands," Renewable Energy, Elsevier, vol. 57(C), pages 94-100.
    14. Gianfreda, Angelica & Parisio, Lucia & Pelagatti, Matteo, 2016. "Revisiting long-run relations in power markets with high RES penetration," Energy Policy, Elsevier, vol. 94(C), pages 432-445.
    15. Stein-Erik Fleten, Johannes Mauritzen, and Carl J. Ullrich, 2018. "The Other Renewable: Hydropower Upgrades and Renewable Portfolio Standards," The Energy Journal, International Association for Energy Economics, vol. 0(Number 2).
    16. Fogelberg, Sara & Lazarczyk, Ewa, 2017. "Wind power volatility and its impact on production failures in the Nordic electricity market," Renewable Energy, Elsevier, vol. 105(C), pages 96-105.
    17. Angelica Gianfreda & Lucia Parisio & Matteo Pelagatti, 2016. "The Impact of RES in the Italian Day-Ahead and Balancing Markets," The Energy Journal, , vol. 37(2_suppl), pages 161-184, June.
    18. Mulder, Machiel & Scholtens, Bert, 2016. "A plant-level analysis of the spill-over effects of the German Energiewende," Applied Energy, Elsevier, vol. 183(C), pages 1259-1271.
    19. Rintamäki, Tuomas & Siddiqui, Afzal S. & Salo, Ahti, 2017. "Does renewable energy generation decrease the volatility of electricity prices? An analysis of Denmark and Germany," Energy Economics, Elsevier, vol. 62(C), pages 270-282.
    20. Tselika, Kyriaki & Tselika, Maria & Demetriades, Elias, 2024. "Quantifying the short-term asymmetric effects of renewable energy on the electricity merit-order curve," Energy Economics, Elsevier, vol. 132(C).
    21. Fogelberg, Sara & Lazarczyk, Ewa, 2015. "The Wind Power Volatility and the Impact on Failure Rates in the Nordic Electricity Market," Working Paper Series 1065, Research Institute of Industrial Economics.
    22. Zafirakis, Dimitrios & Chalvatzis, Konstantinos J. & Baiocchi, Giovanni & Daskalakis, Georgios, 2016. "The value of arbitrage for energy storage: Evidence from European electricity markets," Applied Energy, Elsevier, vol. 184(C), pages 971-986.

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