Future value of hydropower production and correct investments are very much dependent on the future market prices of the different services that hydropower can provide. Information about prices, market designs and price structures for the future power market are therefore important input information to be able solve the main goal of this work package. 

The Norwegian hydropower system is in a state where the need for rehabilitation is increasing and large re-investments are required the next 20 years. At the same time the energy markets are developing rapidly, where changes in policy and alternative technologies create uncertainty in future profitability. To be able to take the right decisions on future investments in hydropower; new methods for investment analysis need to be developed that include both new market perspectives and technologies.

The aim of WP 3 is to prepare the stakeholders for future value creation using hydropower's unique capabilities to provide: energy storage, system services, reliability of supply, environmentally friendly operation, and the ability to adapt to and mitigate consequences of climate change. Increasing value creation from hydropower depends on the ability to exploit opportunities in the power markets through delivery of services such as flexibility, stability and security.

Both quantitative estimates, but especially the relative importance of different market products (e.g. energy prices and different types of ancillary services) are important for the revenue calculation procedures and methods. The goal of Task 3.1 is to use existing information to produce necessary price data to Tasks 3.3 and 3.4. Existing information will be compiled based on literature, from simulations using existing models, workshops and from future research done outside this WP.

Adequate information about the technical condition of critical components and how the condition develop, influence performance, lifetime and failure probability and is important when determining the need for renewal. Advanced methods based on condition monitoring data[40], predictive and risk-based methods, and methods based on detailed knowledge of the environment and the physical behaviour of the components are not much used, although some few examples can be found. Knowledge and methods from other WP's and other projects (e.g. MonitorX NFR245317, SysLife NFR203473) will be used in the new models developed in HydroCen. Operational costs (e.g. start-up costs and equipment wear out) based on methods for estimating relations between operation, loads, performance,  maintenance and lifetime are important topics in Task 3.2.

Decisions on reinvestments, upgrading and extension should be based on a balanced study of their: costs, impact, and benefits. The industry performs studies to find profitable projects for increasing the production capacity of existing power plants. These studies cover integrated economic, technical, environmental and social analyses. There is a need for new methods to evaluate such alternatives, especially because of expected future market developments, but also because of technological development, new environmental constraints and possible multipurpose use of water.

One important part of this WP regards methods for calculating the expected revenues for different future systems and designs. This is challenging because of uncertain development in market mechanisms, uncertain prices in multiple markets and stochastic inflow depending on climate development. Future hydropower design and corresponding revenues are expected to be much more than today. They will be affected by income from short-term variations and flexibility in addition to the more traditional long-term strategic operation of reservoirs. This requires new methods and models with different levels of details and time resolution to be analysed correctly. The problem connected to the combination of the very short-term aspects and the long-terms are proposed divided into two tasks. Task 3.3 focuses on the overall decision process and all aspects that affect revenue from long-term flexibility. Task 3.4 focuses on the short-term revenue calculation and is also used to evaluate which aspects (which markets, uncertainties, physical constraints) that affect long-term flexibility and revenue calculation. Task 3.4 also include a generic research activity related to state dependent (environmental) constraints that typically introduces nonlinearities in the optimization problem being solved. This general problem is very relevant for both short and long-term revenue calculations.

Competing water use is a potential business risk to the power producer. In Norway, the typical competition over water is between environmental concerns and power production, and in urgent situations reservoir capacity might be allocated for flood protection. Internationally, water usage such as irrigation and drinking water supply also pose a risk to the power production. Adequate tools to assess the availability of water is a pre-requisite in all stages of planning in order to optimize the power production in river basin with multi-user water requirements. As such, a broad multi-disciplinary approach is needed. Task 3.5 aims at adapting existing tools for the early-stage assessment of the long-term hydropower resources and its associated risk in river basins with multiple water users, subject also to climate change impacts, as well as for environmental design analysis.

Main objectives: To develop methods and prototype models to maximise the value potential for hydropower in a future with changing markets and restrictions, rapid technology development and increasing needs for renewal and upgrades.

Sub objectives:

• Forecast of the future markets.

• Develop methods and tools for estimation of remaining useful life and failure probability and component degradation

• Develop methods, tools and guidelines for future design/redesign alternatives for upgrading and expanding hydropower

• Demonstrate how knowledge, new technology, methods and tools from HydroCen supports new solutions and value creation

• Establish a model for calculating revenues from hydropower capabilities and develop methodology for a planning model combining the revenue model with: design and maintenance strategy, technology options and environmental impact

• Adapt tools to support assessment of the long-term hydropower resources and its associated risk in river basins with multiple water users under present and future climate

Tasks:

•  T 3.1 Future market structures and prices
• T 3.2 Remaining useful life, failure probability
• T 3.3 Optimal hydro design in the future power system
• T 3.4 Environmental constraints and uncertainties – impact on revenues
• T 3.5 Water resources assessment tool handling multiple water user requirements and constraints, and the impacts on the hydropower production