Browsing by Subject "energy economics"

Earlier research has shown that it is important in climate change adaptation to take into account the indirect impacts of climate change. These are impacts resulting from climate change that have their initial direct effects outside Finland but reflect to Finland through for example international markets. For example, climate change could affect Finland indirectly through changing prices in global food markets. In this thesis I study the impacts of increasing hydropower potential in the Nordic electricity markets because of climate change. Nordic aspect is important as most of the hydropower in the Nordic power markets is produced outside Finland. Climate science has shown that climate change can affect the precipitation and hydropower potential in the Nordic countries. Majority of studies give reason to believe that the hydropower potential will increase and change so that the potential increases more in winter and spring months. However, a lot of uncertainty is related to the results, which is crucial to bear in mind. According to a Nordic research report it is nevertheless very plausible that climate change will affect the hydrology and hydropower potential in Nordic countries from place to place. Hydropower is an important technology in the Nordic electricity markets as depending on the year about half of the power is produced by it. As hydropower’s producing costs are low the annual precipitation affects the electricity price levels so that in a wet year the prices decrease and vice versa. Hydropower has also its role in balancing the production and consumption of power as its production is comparably easy to adjust. I use a simulation model of the Nordic electricity markets by Maria Kopsakangas-Savolainen and Rauli Svento in this thesis. In my analysis I increase the hydropower production (+10%) and study how it affects i.a. the price level and capacities of different power production technologies. This sensitivity analysis is made in various scenarios resulting from different climate and energy policies. In the thesis’ simplified setting increasing the amount of hydropower decreased significantly the price of electricity and thus profits of electricity producers and decreased the amount of thermal power production. Thermal and nuclear production are important technologies for Finland and thus the results are interesting from the Finnish point of view. The results are in-line with a previous Norwegian study. Another potentially significant impact of climate change might the decreasing electricity consumption due to warmer winters but is out of the scope of this thesis.