Integration of Hydropower in a Competitive power market model for water-energy scenario analysis

Hydrological systems and power systems are strongly linked: water is needed for most electricity generation technologies, and electricity is required for all stages of water usage. Growing water and energy demands, and potential climate changes suggest this relationship will become more important for the management of both water and energy resources, and should be assessed. We propose a coupled water-energy modeling approach in which a hydrological model imposes the water constraints on the power system model; hydropower generation is bid to the power market based on the hydrological state of the system; and the demands from one system to the other are computed by both models jointly. For this purpose, we develop a bidding strategy for a price-taker hydropower generator based on reservoir volumes and expected electricity prices. The results from the methodology are comparable to those from a dynamic program. The hydropower bidding strategy showed reasonable performance when tested in a simplified model of a competitive power market.