Abstract
In aggregated power system models, hydro power is used to even out the price fluctuations as much as possible. For power systems with a significant share of hydro power, this results in price profiles which are almost flat. Contrary to this behaviour, the prices in the Nordic countries show considerable daily fluctuations. As a result, a centralized dispatch model which simulates the aggregated hydro production with a high accuracy may fail to model the market prices. In this paper, we explore a possible explanation for this phenomenon, by including additional constraints in the dispatch model to account for the market clearing, using supply curves for the different technologies. The model results in an upward sloping supply curve for hydro power, which can explain the daily price variations seen in the market. We explain the hydro supply curve by considering multiple price-taking hydro producers with different characteristics, and use production data for Swedish hydro power plants to verify that the behaviour of individual hydro producers will result in an upward sloping supply curve.
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