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Dead Battery? Wind Power, the Spot Market, and Hydropower Interaction in the Nordic Electricity Market

It is well established within both the economics and power system engineering literature that hydropower can act as a complement to large amounts of intermittent energy. In particular hydropower can act as a "battery" where large amounts of wind power are installed. In this paper I use simple distributed lag models with data from Denmark and Norway. I find that increased wind power in Denmark causes increased marginal exports to Norway and that this effect is larger during periods of net exports when it is difficult to displace local production. Increased wind power can also be shown to slightly reduce prices in southern Norway in the short-run. Finally, I estimate that as much as 40 percent of wind power produced in Denmark is stored in Norwegian hydropower magazines.

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Energy Specializations: Electricity – Generation Technologies; Electricity – Markets and Prices ; Renewables – Wind ; Renewables – Policy and Regulation

JEL Codes: Q42: Alternative Energy Sources, Q41: Energy: Demand and Supply; Prices, L94: Electric Utilities, C51: Model Construction and Estimation

Keywords: Wind Power, Hydropower, Nordic Electricity Market, Empirical, Time Series

DOI: 10.5547/01956574.34.1.5

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Published in Volume 34, Number 1 of the bi-monthly journal of the IAEE's Energy Economics Education Foundation.


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