Water resource and power generation

Abstract

We propose a simple model of competition between a thermal station and a hydrostation for the production of energy. We show that, despite the static characteristics of the thermal cost function, the thermal output is determined by intertemporal considerations. This results from the scarcity of the water resource which is storable at zero operating cost. We analyze the combination of these technologies in the case of a social planner who maximizes the net total utility from electricity, in the case of private monopoly either regulated or not and, finally, in the case of duopolistic competition in quantities where each private firm operates either a hydraulic power station, or a thermal power station.

Real-Time Versus Day-Ahead Market Power in a Hydro-Based Electricity Market

“…Thus, a linear specification, as considered in most of the theoretical literature (e.g. Crampes and Moreaux, 2001;Garcia et al, 2001;Førsund, 2007;Hansen, 2009) as well as simulation models (e.g. Bushnell, 2003;Kauppi and Liski, 2008;Philpott et al, 2010) seems a reasonable first approximation to normal day-to-day operations.…”

“…Rational competitors realize that r t−1 affects the future production decisions of the firm and adjust their own production correspondingly and thereby residual demand; see Crampes and Moreaux (2001). The rest of total production, x t = N n=1 x nt , is sold in the real-time market"…”

Optimal Dynamic Management of a Renewable Energy Source under Uncertainty

“…The analysis concerns the optimal management of random stocks. I consider the optimal allocation between two energy sources as Crampes and Moreaux (2001). However, two main features have been added: not only do I consider an infinite horizon model, but I also introduce uncertainty on the water inflow.…”

“…4 In order to understand how hydroelectricity consumption smoothing is possible for different levels of stored water, I compute the marginal propensity to consume ∂c/∂z from the first order condition. It is a measure of the efficiency of intertemporal smoothing going from 0 in case of a perfect smoothing to 1 if water is never stored.…”

Environmentally damaging electricity trade

“…Crampes and Moreaux (2001) provide an economic model to study interactions between hydro and thermal units. Rangel (2008) reviews the market and regulatory issues that can arise in such situations, with a focus on possible market power abuses.…”