Long-term uncertainty of hydropower revenue due to climate change and electricity prices

Gaudard, Ludovic, Gabbi, Jeannette, Bauder, Andreas and Romerio, Franco (2016) Long-term uncertainty of hydropower revenue due to climate change and electricity prices. Water Resources Management, 30 (4). pp. 1325-1343. ISSN 0920-4741

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Abstract

Hydropower represents the world’s largest renewable energy source. As a flexible 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 natural 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 analysis 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 established 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 uncertainty 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.

Item Type:	Article
Official URL:	http://link.springer.com/journal/11269
Additional Information:	© 2016 The Authors
Divisions:	Grantham Research Institute
Subjects:	G Geography. Anthropology. Recreation > GE Environmental Sciences G Geography. Anthropology. Recreation > GF Human ecology. Anthropogeography
Date Deposited:	08 Feb 2016 15:48
Last Modified:	17 Oct 2024 16:30
Funders:	Swiss Research Programme 61
URI:	http://eprints.lse.ac.uk/id/eprint/65279

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