A modell of socially optimal hydro reservoir usage - yelding socially optimal outcomes in nordic electricity markets

An extensive electricity transmission network facilitates electricity trading between Finland, Sweden, Norway and Denmark. Currently most of the area's power generation is traded at NordPool, where the trading volumes have steadily increased since the early 1990's, when the exchange was founded. The Nordic electricity is expected to follow the current trend and further integrate with the other European electricity markets. Hydro power is the source for roughly a half of the supply in the Nordic electricity market and most of the hydro is generated in Norway. The dominating role of hydro power distinguishes the Nordic electricity market from most of the other market places. Production of hydro power varies mainly due to hydro reservoirs and demand for electricity. Hydro reservoirs are affected by water inflows that differ each year. The hydro reservoirs explain remarkably the behaviour of the Nordic electricity markets. Therefore among others, Kauppi and Liski (2008) have developed a model that analyzes the behaviour of the markets using hydro reservoirs as explanatory factors. Their model includes, for example, welfare loss due to socially suboptimal hydro reservoir usage, socially optimal electricity price, hydro reservoir storage and thermal reservoir storage; that are referred as outcomes. However, the model does not explain the real market condition but rather an ideal situation. In the model the market is controlled by one agent, i.e. one agent controls all the power generation reserves; it is referred to as a socially optimal strategy. Article by Kauppi and Liski (2008) includes an assumption where an individual agent has a certain fraction of market power, e.g. 20 % or 30 %. In order to maintain the focus of this thesis, this part of their paper is omitted. The goal of this thesis is two-fold. Firstly we expand the results from the socially optimal strategy for years 2006-08, as the earlier study finishes in 2005. The second objective is to improve on the methods from the previous study. This thesis results several outcomes (SPOT-price and welfare loss, etc.) due to socially optimal actions. Welfare loss is interesting as it describes the inefficiency of the market. SPOT-price is an important output for the market participants as it often has an effect on end users' electricity bills. Another function is to modify and try to improve the model by means of using more accurate input data, e.g. by considering pollution trade rights effect on input data. After modifications to the model, new welfare losses are calculated and compared with the same results before the modifications. The hydro reservoir has the higher explanatory significance in the model followed by thermal power. In Nordic markets, thermal power reserves are mostly nuclear power and other thermal sources (coal, natural gas, oil, peat). It can be argued that hydro and thermal reservoirs determine electricity supply. Roughly speaking, the model takes into account electricity demand and supply, and several parameters related to them (water inflow, oil price, etc.), yielding finally the socially optimal outcomes. The author of this thesis is not aware of any similar model being tested before. There have been some other studies that are close to the Kauppi and Liski (2008) model, but those have a somewhat different focus. For example, a specific feature in the model is the focus on long-run capacity usage that differs from the previous studies on short-run market power. The closest study to the model is from California's wholesale electricity markets that, however, uses different methodology. Work is constructed as follows.

Allelopathic effects of filamentous cyanobacteria on phytoplankton in the Baltic Sea

Eutrophication and enhanced internal nutrient loading of the Baltic Sea are most clearly reflected by increased late-summer cyanobacterial blooms, which often are toxic. In addition to their toxicity to animals, phytoplankton species can be allelopathic, which means that they produce chemicals that inhibit competing phytoplankton species. Such interspecific chemical warfare may lead to the formation of harmful phytoplankton blooms and the spread of exotic species into new habitats. This is the first report on allelopathic effects in brackish-water cyanobacteria. The experimental studies presented in this thesis showed that the filamentous cyanobacteria Anabaena sp., Aphanizomenon flos-aquae and Nodularia spumigena are capable of decreasing the growth of other phytoplankton species, especially cryptophytes, but also diatoms. The detected allelopathic effects are rather transitory, and some co-occurring species show tolerance to them. The allelochemicals are excreted during active growth and they decrease cell numbers, chlorophyll a content and carbon uptake of the target species. Although the more specific modes of action or chemical structures of the allelochemicals remain to be studied, the results clearly indicate that the allelopathic effects are not caused by the hepatotoxin, nodularin. On the other hand, cyanobacteria stimulated the growth of bacteria, other cyanobacteria, chlorophytes and flagellates in a natural phytoplankton community. In a long-term data analysis of phytoplankton abundances and hydrography of the northern Baltic Sea, a clear change was observed in phytoplankton community structure, together with a transition in environmental factors, between the late 1970s and early 2000s. Surface water salinity decreased, whereas water temperature and the concentration of dissolved inorganic nitrogen increased. In the phytoplankton community, the biomass of cyanobacteria, chrysophytes and chlorophytes significantly increased, and the late-summer phytoplankton community became increasingly cyanobacteria-dominated. In contrast, the biomass of cryptophytes decreased. The increased temperature and nutrient concentrations probably explain most of the changes in phytoplankton, but my results suggest that the possible effect of chemically mediated biological interactions should also be considered. Cyanobacterial allelochemicals can cause additional stress to other phytoplankton in the nutrient-depleted late-summer environment and thus contribute to the formation and persistence of long-lasting cyanobacterial mass occurrences. On the other hand, cyanobacterial blooms may either directly or indirectly promote the growth of some phytoplankton species. Therefore, a further increase in cyanobacteria will probably shape the late-summer pelagic phytoplankton community by stimulating some species, but inhibiting others.