Abstract
High gas prices and increased dependency on variable renewable energy (VRE) have challenged the reliability of the European power system. This paper analyses the impacts of large-scale VRE balancing in Europe using Norwegian reservoir hydropower with new pumping capacity under elevated natural gas and carbon prices. The two-stage stochastic rolling-horizon market simulator FanSi is used to capture uncertainty in hydro inflow and VRE availability. A Northern European case study evaluates scenarios with increased hydropower flexibility (+18.2 GW), expanded HVDC interconnector transmission capacity (+11 GW) and varying natural gas prices (113-235 EUR/MWh), to assess impacts on decarbonization potential and area prices. Results show that higher gas prices reduce emission reductions from −5.5MtCO2 to −1.1MtCO2. Under low gas prices, adding 11 GW interconnector capacity increases the average area price in Southern Norway by 23.0%, while under high gas prices the increase reaches 51.7%.