Sector Coupling and Operational Research for Environmental Sustainability (SCORES): Emission, Price, and Welfare Impacts of the Nordic Energy Transition

Sweden’s sustainable-energy transition foresees power-sector decarbonisation as well as electrification of industrial and heating demands, i.e., sector coupling. New power capacity will rely on variable renewable energy (VRE), e.g., wind and solar. Since VRE output is intermittent and location specific, it necessitates flexible production, e.g., 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, e.g., 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.