Wind power, network congestion and hydro resource utilisation in the Norwegian power market

Capacity constraints in electricity networks can have important impacts on utilisation of new renewable energy capacity and incumbent generation resources. Neglect of such impacts in development of renewable energy resources can result in crowding-out of incumbent generation. This trade-off is particularly problematic if the incumbent generation also consists of renewable sources, such as hydropower in the Norwegian electricity system. This paper presents a numerical analysis of the current location of wind-power development plans in Northern Norway and their impacts on utilisaton of hydropower. Policy simulations are conducted using a dynamic partial equilibrium model that is calibrated to reflect the structure of the Nordic power market. The paper draws conclusion and policy implications for integration of renewable energy resources in the Norwegian power market.