Wind Value in Hydropower Dominated Electricity Market

This paper studies the interaction between hydro and wind power in hydro-thermal-wind power system. Socially efficient and monopoly hydropower allocation solutions are presented. Market power utilization potential for hydropower is reduced during low demand periods when residual demand crosses the elastic part of thermal supply curve. Conversely, in high demand periods when the residual demand crosses the inelastic part of thermal supply curve, real potential for market power utilization exists. Compared to thermal power systems, wind value factors are high as efficiently allocated hydropower buffers wind power shocks. Monopoly hydroallocation decreases wind power value and the gap to wind values under socially efficient hydropower widens as wind market share increases.