The impact of policy actions and future energy prices on the cost-optimal development of the energy system in Norway and Sweden

Abstract

This paper studies the effects of policy actions on the energy systems in Norway and Sweden, including a nuclear shutdown, a cancelation of restricted hydropower and an expansion of export capacity to Europe. This study apply a stochastic TIMES model that considers the short-term uncertainty in electricity supply and value the flexibility of hydro reservoirs. It is the first time this approach is used to quantify the effects of these policy actions on cost-optimal investments and operations. To consider the uncertainty of the energy market, we analyse the policy actions under four different price developments for biomass, fossil fuels and electricity. The results demonstrate that our stochastic approach provides different model decisions compared to the traditional deterministic approach. Further, we show that the future role of the large hydro reservoirs in Norway and Sweden depends both on the adopted policy actions and on future energy prices, and that the policy actions have a significant impact on the development of the energy system. This insight is valuable when considering the development and management of the hydro reservoirs. It is also valuable for other European countries so that they can evaluate the interplay of the hydro reservoirs with other energy storage options.