Abstract
The difference in characteristics between the hydro based Norwegian power system and the fossil fuel based systems of Germany and Great Britain yield potential benefits of power exchange. Simulation models for the calculations of such benefits need to consider various forms of uncertainty. While uncertainty in hydro inflow has been commonly considered in such models, fuel prices have normally been seen as deterministic. This paper proposes an approach to model fuel price uncertainty in a hydro scheduling optimization framework based on stochastic dynamic programming. The uncertainty in fuel prices and resulting exchange prices are estimated, and used in the analysis of the profitability of new HVDC links from Norway. For this particular analysis of the profitability of new 1400 MW links from Norway to Germany and Great Britain the results show an increase of profitability of 9% when fuel price uncertainty is taken into account. © 2015 IEEE.