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Title

Long-term Uncertainty of Hydropower Revenue Due to Climate Change and Electricity Prices

Authors
Gabbi, Jeannette
Bauder, Andreas
Published in Water Resources Management. 2016, vol. 30, no. 4, p. 1325-1343
Abstract Hydropower represents the world's largest renewable energy source. As a flex- ible technology, it enhances reliability and security of the electricity system. However, climate change and market liberalization may hinder investment due to the evolution of water runoffs and electricity prices. Both alter expected revenue and bring uncertainty. It increases risk and deters investment. Our research assesses how climate change and market fluctuation affect annual revenue. But this paper focuses on the uncertainty, rather than on forecasting. This transdisciplinary topic is investigated by means of a mixed method, i.e. both quantitative and qualitative. The quantitative approach uses established models in natu- ral sciences and economics. The uncertainty is accounted for by applying various scenarios and various datasets coming from different models. Based on those results, uncertainty is discussed through an analysis discerning three dimensions of uncertainty. Uncertainty anal- ysis requires the assessment of a large panel of models and data sets. It is therefore rarely carried out. The originality of the paper also lies on the combination of quantitative estab- lished models with a qualitative analysis. The results surprisingly show that the greenhouse gas scenarios may in fact represent a low source of uncertainty, unlike electricity prices. Like forecasting, the main uncertainties are actually case study related and depend on the investigated variables. It is also shown that the nature of uncertainty evolves. Runoff uncer- tainty goes from variability, i.e. inherent randomness, to epistemic, i.e. limitation of science. The reverse situation occurs with the electricity price. The implications for scientists and policy makers are discussed.
Keywords Mixed methodologyElectricity market liberalizationMountain hydrologyThree-dimensional uncertainty
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Research group Energie, politique et économie
Project FNS: NRP61
Citation
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GAUDARD, Ludovic et al. Long-term Uncertainty of Hydropower Revenue Due to Climate Change and Electricity Prices. In: Water Resources Management, 2016, vol. 30, n° 4, p. 1325-1343. https://archive-ouverte.unige.ch/unige:79863

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Deposited on : 2016-01-22

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