Offshore wind and its effect on the Nordic power market : adding power generation from Sørlige Nordsjø II and Utsira Nord

Abstract

An increasing share of renewable energy sources, such as offshore wind power, is expected in the future power markets. Several authors have found that power prices tend to decrease and fluctuate more when integrating offshore wind. This results from the merit order effect and the intermittent nature of wind power generation. The thesis aims to investigate how deployment of offshore wind power at Sørlige Nordsjø II and Utsira Nord will impact the Nordic day-ahead market. The optimization model used assumes that both sites are connected directly to the Norwegian mainline grid in NO2 and NO5. Adding offshore wind results in declining power prices for all three operating hours accounting for seasonal fluctuations in water reservoir levels. The level of price convergence in the initial baseline prices seems to impact the number of affected bidding areas. With low seasonal water level, all Nordic bidding areas expect for Finland are affected by the additional generation from offshore wind power, whereas only NO1, NO2 and NO5 are affected in the averageand high- seasonal water level scenarios. Moreover, generation increases in the bidding areas with the added capacity and decreases in other affected areas. Overall, the thesis illustrates trends of increasing price differences and price fluctuations when integrating offshore wind.