Future outlook of Swedish hydropower capability to provide flexibility services with a 15 minute trade and settlement period

This thesis evaluates the future outlook of Swedish hydropower’s capability to provide flexibility services, particularly mFRR, under changing market conditions. Hydropower has over the years emerged as an important flexibility provider but new market changes have raised concerns. The market change includes that the Imbalance Settlement Period (ISP) and Market Time Unit (MTU) have been changed from 60 to 15 minutes on mFRR-EAM as well as the implementation of an Activation Optimisation Function (AOF). This thesis therefore investigates how the market change and an intermittent operating pattern (including more start and stop cycles, ramping events and operation outside the optimal operating range) affects hydropower production, BSPs (Balance Service Providers) and BRPs (Balance Responsible Parties). The findings show that the market change affects several aspects of hydropower which have been categorised as technical, market, hydrological and operational. In some cases, the affected aspects are driven by short-term regulation itself, while the market change can amplify the negative consequences. In other cases, the market change introduces new implications. One implication of the market change and intermittent operation is its impact on the local environment and communities. Another aspect is the wear and degradation the intermittent operation causes. By calculations of the related average and marginal cost, indications of how the degradation caused by intermittent operations can be priced in mFRR-EAM are given. However, as intermittent operation of hydropower units significantly shortens the rehabilitation interval, it increases the demand for internal and external resources and can lead to loss of income during standstill. A more intermittent operating pattern followed by the market change also affects the operational aspects as it requires more up- and downregulations of the unit’s production. This, along with a potentially higher financial risk due to higher imbalance prices followed by the market change, affects the capability of providing mFRR services. The question is how hydropower producers should and can act upon the market change or whether it may become necessary to withdraw capacity from the mFRR market.