Flexible supply meets flexible demand: prosumer impact on strategic hydro operations

Simple item page
dc.contributorAalto-yliopistofi
dc.contributorAalto Universityen
dc.contributor.authorHassanzadeh Moghimi, Farzad
dc.contributor.authorChen, Yihsu
dc.contributor.authorSiddiqui, Afzal
dc.contributor.departmentStockholm University
dc.contributor.departmentUniversity of California Santa Cruz
dc.contributor.departmentDepartment of Mathematics and Systems Analysis
dc.date.accessioned2023-05-17T07:52:37Z
dc.date.available2023-05-17T07:52:37Z
dc.date.issued2023-05-09
dc.description.abstractAmbitious climate packages promote the integration of variable renewable energy (VRE) and electrification of the economy. For the power sector, such a transformation means the emergence of so-called prosumers, i.e., agents that both consume and produce electricity. Due to their inflexible VRE output and flexible demand, prosumers will potentially add endogenous net sales with seasonal patterns to the power system. With its vast hydro reservoirs and ample transmission capacity, the Nordic region is seemingly well positioned to cope with such intermittent VRE output. However, the increased requirement for flexibility may be leveraged by incumbent producers to manipulate prices. Via a Nash-Cournot model with a representation of the Nordic region’s spatio-temporal features and reservoir volumes, we examine how hydro producers’ ability to manipulate electricity prices through temporal arbitrage is affected by (i) VRE-enabled prosumers and (ii) the latter plus a high CO2 price. We find that hydro reservoirs could exploit prosumers’ patterns of net sales to conduct temporal arbitrage more effectively, viz., by targeting periods in which prosumers are net buyers (net sellers) to withhold (to “dump”) water. Meanwhile, a higher CO2 price would further enhance hydro reservoirs’ market power because flexible price-taking thermal plants would be unable to ramp up production in order to counter such producers’ strategy to target VRE’s intermittency. Hence, in spite of a flexible demand side to complement additional intermittent VRE output, strategic hydro producers may still exacerbate price manipulation in a future power sector via more tailored exercise of market power.en
dc.description.versionPeer revieweden
dc.format.extent35
dc.format.extent1-35
dc.format.mimetypeapplication/pdf
dc.identifier.citationHassanzadeh Moghimi , F , Chen , Y & Siddiqui , A 2023 , ' Flexible supply meets flexible demand: prosumer impact on strategic hydro operations ' , Computational Management Science , vol. 20 , no. 1 , 23 , pp. 1-35 . https://doi.org/10.1007/s10287-023-00455-1en
dc.identifier.doi10.1007/s10287-023-00455-1
dc.identifier.issn1619-697X
dc.identifier.issn1619-6988
dc.identifier.otherPURE UUID: edb3fa32-1351-4f93-91b0-5f2fcfe7ad41
dc.identifier.otherPURE ITEMURL: https://research.aalto.fi/en/publications/edb3fa32-1351-4f93-91b0-5f2fcfe7ad41
dc.identifier.otherPURE LINK: http://www.scopus.com/inward/record.url?scp=85158994470&partnerID=8YFLogxK
dc.identifier.otherPURE FILEURL: https://research.aalto.fi/files/108192037/Flexible_supply_meets_flexible_demand.pdf
dc.identifier.urihttps://aaltodoc.aalto.fi/handle/123456789/120827
dc.identifier.urnURN:NBN:fi:aalto-202305173164
dc.language.isoenen
dc.publisherSPRINGER
dc.relation.ispartofseriesCOMPUTATIONAL MANAGEMENT SCIENCEen
dc.relation.ispartofseriesVolume 20en
dc.rightsopenAccessen
dc.titleFlexible supply meets flexible demand: prosumer impact on strategic hydro operationsen
dc.typeA1 Alkuperäisartikkeli tieteellisessä aikakauslehdessäfi
dc.type.versionpublishedVersion
Files
Collections
[article-cris] Perustieteiden korkeakoulu / SCI