Portfolio-level investment strategy in renewing hydropower units using cost assessment by river run optimization in hydropower unit failures

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Volume Title
Perustieteiden korkeakoulu | Master's thesis
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Date
2016-12-14
Department
Major/Subject
Strategy and Venturing
Mcode
SCI3050
Degree programme
Master’s Programme in Industrial Engineering and Management
Language
en
Pages
102 + 15
Series
Abstract
This thesis has the objective of developing an optimal strategy for hydropower unit renewal timing. The whole river system is considered with revenues from day-ahead, as well as intraday, balancing and frequency containment reserve markets. The problem is addressed in three steps: by determining the new optimal river run strategy in each failure, by assessing its monetary consequence and by applying this information to investment strategy. A top-down approach for modelling river systems and calculating outage losses is presented. Lost production due to spillage is the largest driver of losses, before effects on captured price. Revenues streams outside the day-ahead market are insignificant in investment decisions. Failures in single-unit plants have the largest consequences, whereas two simultaneous failures in a river are a particular concern only when they occur in the same plant. A substantial share of losses is often realized in plants that do not have the unit failure. Investment in pre-emptive renewal should be high in single-unit plants, whereas plants with a high share of revenues from non-core streams are at risk of overinvestment.
Description
Supervisor
Wallenius, Hannele
Thesis advisor
Kaila, Ruth
Räisänen, Ilari
Keywords
hydropower optimizatio, river run strategy, outage loss, Investment strategy, electricity markets
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