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.

This paper develops a theoretical framework to analyze the link between real-time and day-ahead competition in a hydro-based wholesale electricity market. Predictions of the model are tested on a detailed data set of trades and prices from the Nordic power exchange, Nord Pool. We study market performance before and after a reform that increased the number of price areas (local markets) in Sweden, and reject the hypothesis of perfect competition in some of the Swedish price areas. Our results suggest that firms exercised some local market power during the sample period.

Abstract. This paper attempts to empirically test the effect that wind power production in Denmark has on volatility of the nordpool wholesale electricity prices. The main result is that wind power tends to significantly reduce intraday volatility but increases volatility over larger time windows. The negative elasticity for intraday volatility is likely due to a larger-in-magnitude price effect of wind power on peak hours then off-peak hours. I suggest that this in turn is due to a steeper supply schedule at peak-loads. The positive elasticities in the wider time windows can be intuitively explained by the greater variability of the supply when large amounts of wind power are present. These finding have ramifications for investment in power generation, balancing as well as transmission capacity.

Simulation studies have pointed to the advantages of trading closer to real-time with large amounts of wind power. Using Danish data, I show that, as expected, shortfalls increase the probability of trade on the short-term market, Elbas. But in the period studied between 2010 and 2012 surpluses are shown to decrease the probability of trade. This unexpected result is likely explained by wind power policies that discourage trading on Elbas and lead to unnecessarily high balancing costs. I use a rolling-windows regression to support this claim.

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in EconStor may AbstractThis paper attempts to test the effect that wind power production has on the variability of wholesale electricity prices in the spot market. I use a simple distributed lag econometric model and five years worth of hourly and daily data from Denmark, which is one of the few places with a long history of significant wind power penetration. I show that wind power has the effect of reducing intra-day variability but that this result only partially carries over to price variation over weekly time windows. I suggest that the reduction in price variability in turn is due to a steeper supply schedule at peak-load times.