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Whose heads are we keeping above water? Impacts of risk aversion on hydropower medium-term scheduling

Abstract

The changing and rising uncertainty within power systems may result in more frequent and severe misalignments between hydropower storage management and society's interests. This work examines how risk aversion can influence the use of stored hydropower energy in centralized and liberalized power systems. We investigate the impact of different uncertainty sources and compare an equilibrium with risk-averse hydropower producers to risk-neutral and risk-averse central dispatch optimization approaches. Our main finding is that risk aversion can impact the scheduling strategies of competing hydropower producers in liberalized markets and those of a risk-averse central planner in opposite ways. Notably, risk-averse competing producers may have an incentive to spare less water in the cases of an expected energy deficit at the system level and higher price variability, potentially jeopardizing energy security. Meanwhile, contrary to strategic behaviour, widespread risk aversion in hydropower storage management can decrease or increase the producers’ revenues at an aggregated level, depending on the energy situation. © 2025 The Authors
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Category

Academic article

Language

English

Author(s)

Affiliation

  • SINTEF Energy Research / Energisystemer
  • Norwegian University of Science and Technology

Year

2025

Published in

Energy

ISSN

0360-5442

Volume

336

View this publication at Norwegian Research Information Repository