Modeling the Power Market Impacts of Different Scenarios for the Long Term Development of the Heat Sector

AbstractIncreased domestic and international electric transmission capacity, increased production of variable renewable energy (VRE), and structural changes in electricity demand imply changes in the Norwegian energy system. An increasing power export surplus as a consequence of increasing VRE investments are expected to cause lower average electricity prices, higher power price variations, and more use of electricity in thermal systems. In this study we analyse the effects of changes in the level of flexibility offered by the Norwegian heat sector under different meteorological conditions. The analysis is carried out using the Balmorel partial equilibrium model, extended to simulate the Norwegian heat and power market in great detail. Results show that in years with high power supply and low consumption, the value of VRE is greatly dependent on the load shedding capabilities in the heat market. Likewise, in a year with low power supply and high consumption, large impacts on VRE values are seen when removing the possibility of reducing electricity consumption in the heat sector. For the long term development of the Nordic energy system, ensuring high levels of flexibility in the heat sector are important in order to efficiently adapt more VRE, and hence fulfil renewable energy targets