Long-term uncertainty of hydropower revenue due to climate change and electricity prices

Hydropower represents the world’s largest renewable energy source. As a flexible technology, it enhances reliability and security of the electricity system. However, climate change and market liberalization may hinder investment due to the evolution of water runoffs and electricity prices. Both alter expected revenue and bring uncertainty. It increases risk and deters investment. Our research assesses how climate change and market fluctuation affect annual revenue. But this paper focuses on the uncertainty, rather than on forecasting. This transdisciplinary topic is investigated by means of a mixed method, i.e. both quantitative and qualitative. The quantitative approach uses established models in natural sciences and economics. The uncertainty is accounted for by applying various scenarios and various datasets coming from different models. Based on those results, uncertainty is discussed through an analysis discerning three dimensions of uncertainty. Uncertainty analysis requires the assessment of a large panel of models and data sets. It is therefore rarely carried out. The originality of the paper also lies on the combination of quantitative established models with a qualitative analysis. The results surprisingly show that the greenhouse gas scenarios may in fact represent a low source of uncertainty, unlike electricity prices. Like forecasting, the main uncertainties are actually case study related and depend on the investigated variables. It is also shown that the nature of uncertainty evolves. Runoff uncertainty goes from variability, i.e. inherent randomness, to epistemic, i.e. limitation of science. The reverse situation occurs with the electricity price. The implications for scientists and policy makers are discussed

Climate Change Impacts on Hydropower Management

Climate change affects hydropower production by modifying total annual inflow volumes and their seasonal distribution. Moreover, increasing air temperatures impact electricity consumption and, as a consequence, electricity prices. All together, these phenomena may lead to a loss in revenue. We show that an adequate management of hydropower plants mitigates these losses. These results are obtained by resorting to an interdisciplinary approach integrating hydrology, economy and hydropower management in an interdependent quantitative mode

The Future of Swiss Hydropower A Review on Drivers and Uncertainties

Swiss Hydropower (HP) is currently facing a wide range of challenges that have initiated a debate about future prospects and its role within the envisioned energy transition. Building on this debate, this paper provides an overview of the status and prospects of Swiss HP by identifying and evaluating the different drivers and uncertainties that Swiss HP faces. Based on a review and the perceptions held by some of the main Swiss HP stakeholders the two main topics that need to be addressed are the market driven impacts and the political, legal and social aspects. While the market dynamics cannot directly be influenced by Swiss companies or authorities, the regulatory framework can and needs to be adjusted. However, this requires a comprehensive stakeholder process and is at least a medium-term process

The Future of Swiss Hydropower Realities, Options and Open Questions

The NRP70 project 'The Future of Swiss Hydropower: An Integrated Economic Assessment of Chances, Threats and Solutions' (HP Future) has been initiated in 2014 with the objective to identify options for Swiss hydropower (HP) to adopt to the ongoing and expected electricity system changes. The project has been finalized in 2018 and this final report provides an overview of the obtained results and insights. Following a short summary of the main findings is provided

Conséquences des changements climatiques sur les déclenchements du réseau électrique suite aux chutes de branches provoquées par le vent - Cas d'Avully, Dardagny, Russin et Satigny

Le réseau électrique aérien subit chaque année un certain nombre d'interruptions suite à des causes météorologiques. Parmi celles-ci, il y a la chute de branches causée par le vent qui tombent sur les câbles. Or, les changements climatiques vont provoquer des modifications dans les distributions des intensités du vent. Cette étude tente de déterminer si pour la période future de 2071-2100 une hausse ou baisse des interruptions provoquées par ce type d'évènements est à prévoir pour quatre communes du canton de Genève (Suisse), à savoir Avully, Dardagny, Russin et Satigny. La méthode choisie se veut exploratoire. Une représentation paramétrique est créé en se basant sur un certain nombre de suppositions ainsi que sur la méthode de Monte-Carlo. Les paramètres sont ajustés afin de rendre compte de l'état actuel de la situation. Puis la série temporelle lié au vent est modifiée pour correspondre aux conditions modélisées par un modèle climatique régional (HIRHAM) pour la période 2071-2100. Il est alors possible de prévoir l'évolution des interruptions dans les limites de la représentation paramétrique. L'étude se sépare en quatre parties. Premièrement, les données de deux stations météorologiques situées sur le territoire genevois sont analysées. De plus, les données sur le vent du modèle climatique régional pour le point le plus proche de Genève sont également étudiées. L'objectif est alors l'obtention de deux séries temporelles de vitesses des pointes pour la période 1989-2008 et 2081-2100. Deuxièmement, deux échantillons d'arbres correspondant aux caractéristiques des forêts genevoises sont obtenus grâce à des fonctions aléatoires. Pour chaque spécimen, une vitesse du vent nécessaire pour créer une rupture du tronc est déterminée pour deux situations différentes en se basant sur les lois des modèles forestiers GALES et HWIND. Troisièmement, la longueur de réseau aérien passant à proximité de forêt est déterminée pour chaque consommateur situé sur les quatre communes grâce à des outils de géomatique. Finalement, ces trois éléments sont assemblés afin de créer une représentation paramétrique qui puisse rendre compte des interruptions, actuelles et futures, causées par la chute de branches. La représentation ainsi développée permet d'observer des différences de vulnérabilité, face aux déclenchements causés par la chute de branches, entre les consommateurs. Les résultats donnent des variations faibles, augmentation et diminution, dans le nombre d'interruptions entre les deux périodes de simulation. Cependant, cette approche permet une meilleure compréhension de l'interaction complexe qu'il existe entre le réseau électrique, le vent et son environnement. De plus, une amélioration, en particulier dans les prévisions sur les vitesses des pointes, ou une transposition dans un autre lieu pourraient se révéler intéressantes et amener à des résultats différents

Pumped-storage project: A short to long term investment analysis including climate change

New renewable energy needs flexibility, which can be provided by storage-hydropower. Climate change affects the potential of this technology in both a negative and a positive way, on one hand by altering runoff, and on the other hand by creating new investment opportunity. This paper provides an economic and financial analysis of a future project in a pumped-storage facility that may be initiated in the Swiss Alps following the glacier retreat. The area released may be considered for building a new reservoir. A complete and integrated model is developed based on the tools of analysis provided by econometrics, finance and operational research. The results show that under the present market conditions such an investment is not profitable. Unexpectedly, the sensitivity analysis shows that most of the time higher price volatility reduces annual revenue. Furthermore, the project's lifetime only has a marginal impact on the Net Present Value. The value of the concession, which is the right to use water, is also assessed on the basis of a real option analysis including a long-term horizon. Its present value is substantial even if the project is currently unprofitable. In the discussion, we go beyond the Swiss case study and highlight the implications for energy policy and market design

Impact of climate change and electricity market liberalization on hydropower plants with reservoir

Hydropower is a very important component of the Swiss energy mix, but its future is jeopardized by several factors. To clarify the long-term scenarios, an assessment of the risks and opportunities is necessary. This thesis analyses these complex dynamics, and focuses more particularly on the problems related to climate change and the liberalization of electricity markets. A general analysis of all the drivers that can affect hydropower is first carried out on the basis of a rich literature. Then, the impacts of climate change and market liberalization are analysed by means of specific quantitative methods. The case studies in Switzerland and Italy show that the impact of climate change is relatively low. Local characteristics are important. In addition, an appropriate management may significantly reduce energy production and revenue losses. Uncertainties about runoff are also relatively low, because long-term forecasting is only slightly affected by the different greenhouse gas scenarios. Electricity prices create more uncertainty. Results from a pumped-storage project upstream from the Mauvoisin dam show that present market conditions jeopardize investment in energy storage.L'hydroélectricité est un pilier de l'énergie suisse, même si son avenir est instable. Afin de mieux préparer la transition énergétique et les scénarios à long terme, une évaluation des impacts et risques est nécessaire. Cette thèse analyse cette problématique complexe tout en se concentrant sur les changements climatiques et la libéralisation des marchés de l'électricité. Une première approche englobe tous les ‘drivers' en se basant sur la littérature scientifique et des rapports officiels. Puis, des méthodes spécifiques et quantitatives sont utilisées. Dans les cas étudiés en Suisse et Italie, les changements climatiques ont un impact limité et les caractéristiques locales sont importantes. De plus, une gestion appropriée des installations hydroélectriques permet de réduire les pertes en terme d'énergie produite et de revenus Les incertitudes sur les ruissellements sont également faibles, car les divers scénarios d'émission de gaz à effet de serre apportent peu de variation dans les prévisions à long terme. Par contre, les prix de l'électricité sont une source d'incertitude importante. Finalement, les résultats d'un projet de pompage-turbinage en amont du barrage actuel de Mauvoisin montrent que les conditions de marché actuelles compromettent les investissements dans le stockage de l'énergie

Natural hazard risk in the case of an emergency: the real options' approach

In the case of an emergency provoked by a natural event, decision makers should (1) acquire a comprehensive understanding of the current dynamics and (2) take the optimal decision based on the information available at that moment. Scientists should provide the key inputs to decision makers, as well as clearly highlight the current dynamics. While much progress has been made in this field, the theory of options, which was developed to assess financial and real investments in an uncertain world, has as yet never been applied in emergency management related to natural hazards. This article highlights, through some simple examples, the contribution that this approach may provide in this field. First, it allows the comparison of different strategies and to value their degrees of flexibility. Second, it allows the determination of the optimal timing of different types of intervention. Finally, thanks to decision trees, this approach provides a clear and concise presentation of the current dynamics. Options theory possesses an interesting potential to improve emergency management

The future of hydropower in Europe: Interconnecting climate, markets and policies

Hydropower is very important for electricity supply security in the European inter-connex- ion as well as for the economy of regions (primarily peripheral) that possess water resources. Its future may however be jeopardized by several factors: climate change, the development of new renewable energy, the creation of super and micro-grids, and progress in power storage technology. Energy and climate policy, as well as electricity market design and dynamics play a pivotal role. This article carries out a comprehensive analysis of all these factors and discusses the future of hydropower. This discussion follows an overview of the present situation and of future drivers. The technical, environmental, economic and political aspects of the problem are analyzed with an interdisciplinary approach. The stakes as well as the uncertainties are highlighted. The conclusion is that hydropower has a promising future, particularly in light of emerging sustainable energy policy, but that the risks should not be overlooked. Academics will find a comprehensive interdisciplinary analysis of hydropower in this article, whereas public bodies, communities and hydropower companies can identify the strategic variables that should be taken into consideration in the decision making process. The end of water concessions or authorizations is also evoked