Abstract
This paper studies the operation of a small renewable and hydro-dominated power system when introducing environmental constraints. The risk of rationing and the local price formation is investigated using a stochastic, cost-minimising optimisation model for long-term operation of a regional renewable power system with reservoir hydropower. The model is applied to a case study based on Norwegian hydropower plants with state-dependent, environmental constraints on reservoir management. The results demonstrate the reduced operational flexibility of the hydropower system and an increased risk of rationing, when the environmental constraint is imposed. In some of the case runs, the long-term management of the constrained reservoir is found to change considerable, but is also shown to be sensitive to the value of lost load, the transmission capacity and the total wind power generation.