Modern Cost–Benefit Analysis of Hydropower Conflicts

Modern Cost–Benefit Analysis of Hydropower Conflicts

Edited by Per-Olov Johansson and Bengt Kriström

This important book sheds light on the ways in which modern tools of welfare economics can be used to assess the benefits and costs of resource conflicts involving hydropower. The chapters highlight key methodological issues in this area; ranging from the intersection between cost–benefit analysis and behavioral economics, to the value of load balancing services provided by hydropower. The inclusion of insights from expert contributors from both sides of the Atlantic brings a unique and interesting range of viewpoints to the work.

Chapter 7: Renewable Energy Expansion and the Value of Balance Regulation Power

Finn R. Førsund and Lennart Hjalmarsson

Subjects: economics and finance, environmental economics, environment, environmental economics, water


Finn R. Førsund and Lennart Hjalmarsson 1 INTRODUCTION To achieve a stable and reliable electricity supply, efficient provision of reserve capacity or, more generally, ancillary services is crucial. Because of the expansion of wind power with random variation in supply, and expected environmental restrictions in hydropower operation causing reductions in regulated hydropower capacity, the balancing power and system reliability issues have become topical in Scandinavia. While system reliability is less of a problem in a regulated electricity market, the efficient design of markets for ancillary services in liberalized electricity markets is more of a challenge. Moreover, in the integrated (Danish– Finnish–Norwegian–Swedish) Nordic electricity market with countryspecific Transmission System Operators (TSOs) or Independent System Operators (ISOs), the harmonization of balance regulation is another challenge. A third challenge is harmonization of terminology, which greatly varies across systems and countries, including across the Nordic countries. There are several kinds of ancillary services, and one may distinguish among: ● ● ● ● ● frequency controlled (automatic reserves); fast (manually controlled) reserves, in thermal systems called spinning reserves for rampable thermal units already on-line and non-spinning reserves for off-line units such as gas turbines or interruptible or curtailable loads; replacement or peak-load reserves (thermal plants that may take hours to activate); voltage support (services, often provided by equipment such as shunt capacitors, static var compensators, and synchronous condensers that are required to maintain voltage stability); black-start capability (generating units that self-start without an 97 JOHANSSON PRINT (M2616).indd 97 26/04/2011 08:02 98 Modern cost–benefit analysis...

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