University of Oulu

Huuki, H., Karhinen, S., Ashraf, F. B., Haghighi, A. T., & Marttila, H. (2022). The economic cost of hydropower environmental constraints under decreasing price volatility. River Research and Applications, 38( 10), 1815– 1828.

The economic cost of hydropower environmental constraints under decreasing price volatility

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Author: Huuki, Hannu1,2; Karhinen, Santtu2; Ashraf, Faisal Bin3;
Organizations: 1Department of Economics, Accounting and Finance, University of Oulu Business School, Oulu, Finland
2Finnish Environment Institute, Oulu, Finland
3Stockholm Environment Institute, Stockholm, Sweden
4Water, Energy and Environmental Engineering Research Unit, University of Oulu, Oulu, Finland
Format: article
Version: published version
Access: open
Online Access: PDF Full Text (PDF, 1.9 MB)
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Language: English
Published: John Wiley & Sons, 2022
Publish Date: 2022-12-09


Hydropower operation optimization in river systems involves market prices, technological constraints affecting the efficiency of turbines, and flow constraints set by an environmental regulator. Comprehensive environmental flow regulation includes the ecological state of a river system and the impact on hydropower value. This article studies the impacts of environmental constraints on hydropower value under varying electricity price volatility scenarios. The effects of maximum flow, minimum flow, and flow ramping constraints are studied analytically and quantitatively. We frame the lost hydropower value as the economic cost of these constraints. We show that the economic costs of the environmental constraints decrease with lower price volatility. We use a marginal cost and marginal benefit framework to illustrate that the optimal flow constraint should be tightened if the price volatility decreases in the electricity market. Our approach illustrates how electricity price volatility influences the analysis of optimal environmental constraints in regulated river systems. Finally, we analyse the effect of different environmental flow release options in fishways on the economic cost of a fishway. If the hydropower operator can optimize the fishway flow allocation, then the loss in hydropower value is lower than under a constant fishway flow.

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Series: River research and applications
ISSN: 1535-1459
ISSN-E: 1535-1467
ISSN-L: 1535-1459
Volume: 38
Issue: 10
Pages: 1815 - 1828
DOI: 10.1002/rra.4049
Type of Publication: A1 Journal article – refereed
Field of Science: 1172 Environmental sciences
Funding: We are grateful for the financial support from the Academy of Finland project EcoRiver (323810) and Academy of Finland Strategic Research Council project BCDC Energy (AKA292854). Writing was also supported by Maj- and Tor Nessling foundation grant (201800109).
Academy of Finland Grant Number: 323810
Detailed Information: 323810 (Academy of Finland Funding decision)
292854 (Academy of Finland Funding decision)
Copyright information: © 2022 The Authors. River Research and Applications published by John Wiley & Sons Ltd. This is an open access article under the terms of the Creative Commons Attribution License, which permits use, distribution and reproduction in any medium, provided the original work is properly cited.