Electricity production in a hydro system with a reservoir constraint

The purpose of this article is to analyze how market power may affect the allocation of production between seasons (summer and winter) in a hydro power system with reservoir constraints and inflow uncertainty. We find that even without market power the price in the summer season may be lower than the expected price in the winter season. Market power may in some situations lead to higher sales and lower price in summer than the competitive outcome and in other situations to the opposite result. Furthermore, market power may lead to a smaller price difference between summer and winter than in a competitive market.