Water values in future power markets

Abstract

In this paper we elaborate on how a hydropower producer's expected marginal value of water (water value) is affected when considering both sales of energy and reserve capacity in a liberalized market setting. We derive analytical expressions for the water value in this market context, and verify these through numerical computations. We find that the water values are more sensitive to changes in the reservoir level when considering sales of both energy and reserve capacity compared to the energy-only case.

Medium-term scheduling of a hydropower plant participating as a price-maker in the automatic frequency restoration reserve market

“…A simplified version of the decomposed weekly problem formulated in [18] was used in [22], without the above-mentioned discouraging linear constraints, to derive an analytical expression for the water value of a single hydropower reservoir in the same market context as in [18]. A few interesting conclusions about the influence of the spinning reserve capacity sales on the water value were drawn from the analytical expression and verified in a case study.…”

“…The consideration of start-up or shut-down decisions in [17], [18] and [22] would make the expected future revenue function (also referred to as profit-to-go [14] or cost-to-go function in centralized market contexts [23]) non-concave, and would therefore be necessary to "concavisate" it [24]. Instead, the authors of [25] chose to use an SDP-based medium-term generation scheduling model to compute the water value of a single hydropower reservoir, in the same market context as in [18], and to formulate the decomposed weekly decision problem as a mixed integer linear programming (MILP) problem, considering the status (on/off) of the hydro generators as binary decisions.…”