Abstract
This paper presents a novel optimization model for the calculation of the water value of a hydropower plant. The model has a time horizon of 1 year with 1-day decision stages, considers sales of both energy and frequency restoration reserves (FRR) and is solved by stochastic dynamic programming. The novelty of the model is that it considers the producer's price-making ability in the FRR market. The proposed model is used to obtain the water values of an existing hydropower plant. The water values are then used to simulate the day-ahead scheduling of the hydropower plant in a 100-year scenario. The results are compared to those obtained without considering the producer's price-making ability in the FRR market. The profit increase is modest compared to the uncertainty existing in the day-ahead scheduling in all analysed cases. However, the water spillage is significantly lower if the producer's price-making ability in the FRR market is considered when computing the water value. This last result may have important implications for the plant's operation, especially when the reservoir is also used for the purpose of flood control, as the one used as case study in the paper, and many others all over the world.