Framework for Optimal Production and Transmission of Electricity

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Førsund, F.R.




Frisch Rapport
Number in series: 2


The methodological approach is to set up a rather aggregated model designed to give qualitative insights into optimality properties. The model encompasses five technologies; hydro generation based on reservoirs, thermal generation based on fossil fuels, and intermittent generation encompassing run-of-river, wind and solar. Assuming limited generation capacity introduces the manoeuvrability as important for managing reservoirs. Furthermore, using hydropower based on reservoirs requires a dynamic analysis. The presence of uncertainty makes finding optimal use of reservoirs rather demanding. Some qualitative results are offered. Using Scandinavian hydropower to act as a battery for European intermittent generation is analysed using a two country model with one country having hydropower with reservoirs and the other country having intermittent generation and also thermal capacity to make the model more realistic. The main result is that optimal electricity prices will be the same in both countries if transmission is not restricting trade. The country having intermittent generation will typically export thermal generation and not intermittent. The consumers are aggregated to just one and two in the trade model. Introducing a transmission network having nodes of generation of the five technologies and consumer nodes, energy losses and congestion have a decisive impact on the structure of optimal prices when alternating current is used and the network has loop flows. There are system-wide fundamental electricity external effects. All consumer nodes may have different prices determined by the externalities and production nodes different costs. Short-run nodal prices may give a guide to investment in transmission and production capacities. However, future uncertainties of distribution of demand over nodes and weather patterns, and long life of structures and capacities of the networks and generation of electricity make optimal investments difficult to determine.


C61, Q41, Q42


Electricity modelling; Hydropower; Intermittent power; Nodal prices; Thermal power; Transmission


Oppdragsgiver: Norges forskningsråd
Oppdragsgivers prosjektnr.: 243626
Frisch prosjekt: 3149 - Security of supply in a green power market - The challenges and opportunities of intermittent power