University of Oulu

S. Karhinen, H. Huuki, Private and social benefits of a pumped hydro energy storage with increasing amount of wind power, Energy Economics, Volume 81, 2019, Pages 942-959, ISSN 0140-9883,

Private and social benefits of a pumped hydro energy storage with increasing amount of wind power

Saved in:
Author: Karhinen, S.1,2,3; Huuki, H.1,2
Organizations: 1Finnish Environment Institute, P.O. Box 413, 90014, University of Oulu, Finland
2Department of Economics, University of Oulu, P.O. Box 4600, Finland
3Martti Ahtisaari Institute of Global Business and Economics, University of Oulu, P.O. Box 4600, Finland
Format: article
Version: accepted version
Access: open
Online Access: PDF Full Text (PDF, 1.1 MB)
Persistent link:
Language: English
Published: Elsevier, 2019
Publish Date: 2021-06-08


In this paper, we calculate the long-term profitability of a pumped hydro energy storage (PHES) plant that is planned to be built in an old mine. We model the optimal PHES operation for several scenarios with different wind power penetration levels. Our modelling approach first involves estimating wholesale electricity prices for the day-ahead, intraday and balancing market as a function of wind power penetration. The estimated price profiles are implemented in a dynamic programming model, where the PHES plant maximises its balancing market revenue given the optimal commitment in the day-ahead market. We show that increasing the wind penetration changes the optimal PHES operation and increases the PHES profits. Additionally, we quantify how the costs of wind power balancing are affected by the PHES investment. Policy implications are drawn based on the estimated private and social benefits from the investment.

see all

Series: Energy economics
ISSN: 0140-9883
ISSN-E: 1873-6181
ISSN-L: 0140-9883
Volume: 81
Pages: 942 - 959
DOI: 10.1016/j.eneco.2019.05.024
Type of Publication: A1 Journal article – refereed
Field of Science: 512 Business and management
222 Other engineering and technologies
Funding: Funding from the Academy of Finland Strategic Research Council project BCDC Energy (AKA292854), Academy of Finland project Regulation and dynamic pricing for energy systems (288957), Yrjö Jahnsson Foundation, Tauno Tönning Foundation and Martti Ahtisaari Institute is also gratefully acknowledged.
Academy of Finland Grant Number: 292854
Detailed Information: 292854 (Academy of Finland Funding decision)
288957 (Academy of Finland Funding decision)
Copyright information: © 2019 Elsevier Ltd. All rights reserved. This manuscript version is made available under the CC-BY-NC-ND 4.0 license