Decentralized planning of hydroelectric power systems

This paper discusses the application of marginal cost concepts to the expansion planning of hydroelectric systems. It is shown that the remuneration of hydroelectric plants should not be based on their energy production, as this leads to excessive revenues for the plant owner, and distorts the dimensioning of upstream reservoirs. In order to produce the adequate economic signals, it is necessary to separate the contributions of turbines and reservoirs. Examples from the Brazilian power system are presented and discussed.<
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