Hydropower Operation in a Changing Market Environment   A Swiss Case Study

Schillinger, Moritz; Weigt, Hannes; Barry, Michael; Schumann, René

doi:10.2139/ssrn.3110605

Cited by 8 publications

(18 citation statements)

References 24 publications

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“…Comparing the costs of hydropower for providing balancing capacity with the observed balancing market prices leads us to the conclusion that Swiss balancing market prices and their seasonal dynamic are justified by the characteristics of the hydro dominated system. These findings add to the assessment of revenue opportunities for Swiss hydropower in Schillinger et al (2017). Given the direct linkage of energy market based opportunity costs with the balancing prices in Switzerland, companies should not be able to extract significant additional income from balancing provision on average.…”

Section: Introductionmentioning

confidence: 78%

“…Additional studies, which have a look at hydropower and balancing markets, analyse the profit potential of balancing markets from a hydropower perspective. Examples of such studies are Chazarra et al (2016), Fodstad et al (2018) and Schillinger et al (2017). Chazarra et al (2016) present a detailed optimization model to derive the optimal generation schedule of a hydropower cascade that maximizes its profit on the Spanish energy and balancing markets.…”

Section: Balancing Markets and Hydropower In The Literaturementioning

confidence: 99%

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Bidding Into Balancing Markets in a Hydrodominated Electricity System

Schillinger

Weigt

2019

SSRN Journal

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In an electricity system, demand and supply have to be balanced in real time. Since most energy is traded before real time already in forward, day-ahead and intraday markets imbalances can occur. To ensure the balance between demand and supply even if power plants deviate from their schedules, the system operator procures balancing capacity and energy in balancing markets. The market outcomes may significantly differ from one country to the other depending on the underlying generation technologies and market design. In this paper, we have a look at the balancing market prices of a hydro-dominated electricity system using Switzerland as a case study. By using a short-term hydropower operation model and a set of Swiss hydropower plants, we are able to identify a competitive benchmark for Swiss balancing market prices defined by the opportunity costs of hydropower for providing balancing capacity. Our results show that Swiss balancing market prices are influenced by several drivers but do not hint at any market imperfections.

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Section: Introductionmentioning

confidence: 78%

Section: Balancing Markets and Hydropower In The Literaturementioning

confidence: 99%

Bidding Into Balancing Markets in a Hydrodominated Electricity System

Schillinger

Weigt

2019

SSRN Journal

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“…Given the large variety of hydro plants in Switzerland we focus on general assessments based on generic plant types (i.e. big seasonal storage plants, small scale run-of-river like plants, and in between medium sized plants, see Schillinger et al 2017) and cross-validated our findings within two case studies on HP cascades in Valais and Ticino.…”

Section: Value Of Flexibilitymentioning

confidence: 88%

“…the uncertainty of the actual call-up, the limited size of the Swiss balancing markets, and imperfect trading behavior) show a significant reduction of the obtainable additional profit. Overall our analyses show that the lower range of estimates for taking part in balancing marketes would provide additional revenues in the range of 4-13% (compared to a spot-only strategy,Schillinger et al (2017)).…”

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confidence: 84%

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The Future of Swiss Hydropower: Realities, Options and Open Questions

et al. 2019

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The NRP70 project 'The Future of Swiss Hydropower: An Integrated Economic Assessment of Chances, Threats and Solutions' (HP Future) addresses the challenges Swiss Hydropower faces in the changing electricity market environment. In particular it aims to answer four main research questions:1. What are short-term operational options for Swiss HP to cope with the volatile market situation? 2. What are long-term investment options for Swiss HP and how can uncertainty be accounted?3. What are the regional impacts from a comprehensive sustainability perspective? 4. What are the effects of different water fee reform options?The project started in fall 2014 and lasted until December 2018. This final report provides a summary on the main findings and recommendations for decision makers. 2 Executive SummaryThe NRP70 project 'The Future of Swiss Hydropower: An Integrated Economic Assessment of Chances, Threats and Solutions' (HP Future) has been initiated in 2014 with the objective to identify options for Swiss hydropower (HP) to adopt to the ongoing and expected electricity system changes.The project has been finalized in 2018 and this final report provides an overview of the obtained results and insights. Following a short summary of the main findings is provided. Troublesome yearsThe decline of wholesale electricity prices in the last years has initiated a cascade of effects within the Swiss energy landscape: companies' books were in the red and concepts for selling HP assets were issued, calls for subsidies emerged with the Confederation granting support for vulnerable HP installations for the next five years, water fee reduction and adjustments were put on the agenda, and overall the envisioned role of Swiss HP for the Energy Strategy 2050 was questioned. Even though the discussion has slowed down a bit, the 'crisis' highlighted the main challenges Swiss HP needs to address: market and political, legal and social aspects. The importance of those drivers has also been identified by Swiss HP stakeholders in a project workshop conducted in 2015 and the relation between market challenges and the Swiss regulatory and policy framework forms the basis of our assessment. It's the markets, stupid!The Central European market development is the single most important driver for Swiss HP profitability. Albeit HP flexibility is seen as a valuable asset and allows diverse trading strategies, our assessment shows a limited payoff in today's markets. Additional revenue potential from optimized trading across multiple markets is likely in a range of 10% to 25%. This in turn can be expected to be insufficient if prices remain below 40CHF/MWh for prolonged periods but could be crucial for cost recovery in the 40 to 60CHF/MWh range. Given that the future market development is uncertain and low price trajectories cannot be ruled out, the development of global fuel prices and of the European Emission Trading System are of central importance for Swiss HP. As influencing those market dynamics is out of reach for Swiss decision makers, companies...

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