Wind, PV, and Hybrid Power Plant Operation in Competitive Nordic Electricity Market With High Profit Cannibalization

Abstract

This study presents a technoeconomic analysis of a hybrid wind-PV (photovoltaic) power plant (HPP) compared to onshore wind power plants (WPPs) and photovoltaic power plants (PVPPs) in the Nordic electricity market, focusing on locations in Finland and Sweden. Wind power capacity has recently increased significantly in the Nordics, increasing the profit cannibalization of wind power. Renewable energy subsidies have been phased out in Finland and Sweden, thus new wind and PV power value creation is formed from the power market. The PV power capacity has also encountered significant growth in the Nordics. However, the capacity is still relatively low, allowing more revenue for produced PV power compared to wind power. The lower PV power profit cannibalization has increased interest in HPPs instead of WPPs. This contribution studies the economic feasibility of wind and PV power in changing market conditions in the Nordic electricity market. The market operation is modeled with three different configurations including selling all the power into the day ahead spot market and baseload or pay-as-produced power purchase agreement (PPA). In addition, a battery energy storage system (BESS) investment is analyzed using the operating strategy of shifting production to more profitable spot price hours. This study shows that due to the profit cannibalization and high cost of capital, the power plants are currently not profitable in the Nordic electricity market except when the bidding area has high average spot prices. The worst profitability was with WPPs when exposed to the market shape risk and with PVPPs when pay-as-produced PPA was agreed upon due to the higher levelized cost of electricity. However, the PV power profit cannibalization is expected to increase in the future as more PVPPs operate in the Nordic power market. Thus, the PVPP shape risk may increase in the future as well.