Price Volatility as a Business Opportunity
Assessing the profitability of a pumped storage hydropower plant requires more than average electricity prices. Revenue streams are created at the intersection of price volatility and operational strategy – hour by hour, and increasingly quarter-hour by quarter-hour. By understanding production and consumption profiles and working with high-resolution data, flexibility can be matched against assumed future price movements. This provides a robust basis that reflects how value is actually generated.
A Changing Market – Established Capabilities
The electricity market is evolving, yet the need for controllability and flexibility remains a constant. In a system with a growing share of weather-dependent generation, the ability to store or deliver electricity at short notice gains tangible value. The characteristics of pumped storage align closely with these system needs, meaning that revenue potential in practice depends on when and how the asset can be deployed.
Asset-Specific Analysis
A credible revenue assessment requires a future scenario that links market logic to the specific investment. At Sigholm, we continuously analyse price formation, market dynamics and how different forms of flexibility can be translated into revenue streams. Based on this ongoing analysis, we tailor the calculation to the individual actor’s conditions – including geographical location, grid connection, strategy, and the constraints and opportunities arising from the plant’s technical design.
Modelling of Pumped Storage
With the overall framework established, we proceeded to a more detailed estimate. Using Sigholm’s long-term electricity price forecast, we simulated hourly data series and added a calculation layer that accounts for reservoir energy volumes, pump and turbine capacities, and relevant efficiency factors. In this way, market signals are integrated with the plant’s physical parameters and the operational profile that is feasible in practice.
The objective is to estimate potential earnings as realistically as possible. The assessment therefore builds on hourly resolved data, actor-specific profiles and a clearly defined future scenario, where each assumption is transparent and traceable. The result is a decision-support basis demonstrating how a pumped storage facility can create value given market price levels, volatility and the plant’s actual operational constraints.
