Hydropower Navigating a Disruptive Power Market: How Italian Producers Stay Resilient

Hydropower energy producers have had a crucial, but extremely difficult role in the power market disruption of the past two years, as energy prices soared and supply was uncertain for many European countries. In this new landscape, hydropower played a crucial role in grid stability and constant energy supply, because of its significant storage capabilities. The best example is Italy, where regulators turned to storage hydro to address soaring energy prices, and to ensure grid stability.

With HYDROGRID’s help, hydropower plant operators in Italy were able to navigate the disruptive power market and stay resilient amidst changing regulations and unpredictable events.

What changed?

During the power market uncertain times of last year, Italian regulators sought to stabilize the power market by imposing a monthly predictive planning cap for storage hydro that stopped asset owners from conducting price driven dispatch in futures past a calendar month.

For managers and operators of storage hydropower plants, long-term production planning had to be replaced with highly reactive, real-time, short-term optimisation of energy production. This regulation was highly disruptive, leading to a complete redesign of production planning strategies, financial planning, maintenance planning and environmental restriction management. Ahead of this change, many asset managers decided for a #smarthydro solution that could help their teams meet the challenge.

Development of Energy Prices on the Italian Market in 2023

N25 leaves power producers with limited resources to avoid producing during negative pricing moments, which have occurred every calendar month in 2023. This is why price driven dispatch that follows the N25 regulation became a priority for Italian production planners.

Why did it change?

N25 (Legge 28 March 2022) is a set of emergency measures passed in response to the COVID-19 resulting effects and the worrying volatility in European power prices. The new regulation sought to bring stability in power production by limiting the horizon of price driven dispatch.

With a shortened planning horizon in place, the Italian market saw more stable monthly generation patterns and, consequently, fewer price spikes. On the other side, large storage asset managers saw their reservoir capabilities cut short with limited time to adapt their medium-, and long-term planning.

The change came after a long period of uncertainty and energy price volatility, in which renewable energy producers played a crucial role in stabilising the gird and insuring energy safety. Through the N25 limitation of the production planning horizon, storage hydro was further constrained to maintain consistent energy production patterns, which in turn brought the energy prices down.

How did HYDROGRID help Italian hydro-power producers?

The calendar month restrictions imposed made predictive production planning essential to the profitable management of storage hydropower plants. For our client in Italy, HYDROGRID Insight’s self-calibrating system could detect and address all constraint breaches by adjusting the production planning in real-time, while steering results towards the desired end-of-month levels.

HYDROGRID Insight was the ideal tool for this harsh transition, partly because of our proprietary HIRO algorithm, which could be fine-tuned to the new market requirements in record time.

The increased flexibility and resilience that our robust algorithms brought have enabled price driven dispatch within the calendar month, while maintaining all pre-existing parameters and constraints of hydropower plants. It is certain that all power markets will face more such Black-Swan events, which is why digital tools such as Insight are built to adapt to unforeseen circumstances.

If you are also facing changing regulations, or you want to anticipate disruptive events that will impact your production planning strategy, give us a call, and discover how HYDROGRID can help your hydropower plant stay resilient to power market changes!