Economics for Power Sector

(a) Solar hour (2 marks)

A solar hour is the period of the day when solar radiation is strong enough for PV plants to generate electricity, typically about 9 AM to 4 PM with a peak near noon. In the energy market it is a scheduling and trading block in which solar output is significant. Because solar output is variable, intermittent and weather-dependent (non-dispatchable), these hours are scheduled and priced differently from other hours.

(b) Significance in demand and supply balance (3 marks)

1. Duck curve / net load effect: Solar generation reduces net load (demand minus solar) at midday. With high solar penetration this gives a midday dip followed by a steep evening ramp when solar fades, which needs flexible resources such as peaking hydro, storage or gas peakers.
2. Price and merit order effect: Solar has near-zero marginal cost, so it is dispatched first during solar hours. This depresses midday wholesale prices and displaces costlier plants, and it shapes PPA valuation and investment signals for storage and demand response.
3. Reserve and balancing needs: Solar hours need downward reserves to absorb surplus solar and upward ramping reserves as solar declines toward the evening peak. Accurate solar forecasting is essential for load-generation balance, frequency control and pondage scheduling, particularly in Nepal's hydro-dominated system and in cross-border trade timing with India.