Evaluating Wind-Following and Ecosystem Services for Hydroelectric Dams in PJM

Hydropower can provide inexpensive, flexible fill-in power to compensate for intermittent renewable generation. We model the decision of a hydroelectric generator to shift power capacity away from the day-ahead energy market into a "wind-following" service that smoothes the intermittent production of wind turbines. Seasonal wind patterns produce conflicts with "ecosystem services" -- the maintenance or enhancement of downstream ecosystems. We illustrate our decision model using the Kerr Dam in PJM\´s territory in North Carolina over a three-year period from normal water to extreme drought conditions. We use an optimization framework to estimate reservation prices offering wind-following services. Wind-following may be profitable at low capacity levels during some time periods if ecosystems services are neglected and if reserves-type payments are provided. Wind-following with ecosystem services yields revenue losses that typically cannot be recovered with reserves market payments. Water release patterns are inconsistent with ecosystem-services goals when providing wind-following, particularly in drought years.