On July 15, 2024, PhD student Farzad Hassanzadeh Moghimi will present his ongoing work on “Storage, Transmission, and Renewable Interactions in the Nordic Grid”. The seminar takes place at the Department of Computer and Systems Sciences (DSV), Stockholm University.

Respondent: Farzad Hassanzadeh Moghimi, DSV
Opponent: Jalal Kazempour, Technical University of Denmark (DTU)
Main supervisor: Afzal Siddiqui, DSV
Supervisor: Aron Larsson, DSV
Professor closest to the subject: Rahim Rahmani, DSV

Contact information for Farzad Hassanzadeh Moghimi

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Abstract

Deep decarbonisation of the power sector emphasises the urgent need for increased integration of variable renewable energy (VRE) sources such as wind and solar. While VRE provides emission-free and cost-effective energy in its operations, its intermittent production necessitates utilisation of variation-management mechanisms, such as storage, transmission, and demand-side response. In this context, the Nordic countries aim for strategic leadership in navigating the complexities of the sustainable-energy transition by leveraging existing flexible capacities, particularly hydro reservoirs.

However, flexible producers’ incentives may differ from those of society in a deregulated electricity industry such as that of the Nordic region. Large power companies may have enough flexible capacity to manipulate electricity prices through their own generation output. This market power could increase in a future power system with higher VRE output that needs more flexibility. Furthermore, the dynamics introduced by CO2 pricing, combined with the emergence of prosumers, who are agents engaged in both electricity consumption and generation, may bolster firms’ scope for strategic behaviour, thereby exacerbating unfavourable economic and environmental outcomes.

Simultaneously, policymakers face the formidable challenge of integrating intermittent output from VRE, even in a well-functioning power sector with flexible generation. The misalignment of incentives between producers and society, compounded by political constraints that prevent accurate pricing of CO2 emissions according to social costs, complicates the challenging landscape of decarbonisation. Therefore, transmission planning must be proactively recalibrated to account for economic and environmental distortions to mitigate welfare losses from imperfect competition and incomplete CO2 pricing.

This thesis utilises a game-theoretic framework to capture the behavioural dynamics of agents and the optimal transmission-expansion strategy in a VRE-dominated power system. Such an approach reflects the complex interactions between firms’ strategic incentives and climate-policy imperatives, thereby enabling a thorough understanding of the complex challenges of transitioning to a decarbonised power system.