Research project Sector Coupling and Operational Research for Environmental Sustainability (SCORES)
Sector coupling, for example between power and heat, affects the strategic leverage of large producers. Using game theory, we will devise policy mechanisms to mitigate distortions to welfare, prices, and emissions.
Sweden’s sustainable-energy transition foresees power-sector decarbonisation as well as electrification of industrial and heating demands, that is sector coupling. New power capacity will rely on variable renewable energy (VRE), such as wind and solar. Since VRE output is intermittent and location specific, it necessitates flexible production, for example hydropower. Yet, flexible plants may enjoy greater leverage under high VRE penetration to set electricity prices, which requires proactive regulation and transmission design to mitigate welfare losses from producers’ market power.
Via game-theoretic models, we will identify how flexible plants’ market power is affected by sector coupling, for example by trading in both power and heat markets, and devise countervailing mechanisms to attenuate economic and environmental distortions. Our insights will support policymakers in crafting a welfare-enhancing transition to a sustainable power system.
The full title of this project is “Sector Coupling and Operational Research for Environmental Sustainability (SCORES): Emission, Price, and Welfare Impacts of the Nordic Energy Transition”.
Project members
Project managers
Afzal Siddiqui
Professor
Members
Aron Larsson
Senior lecturer
