Hydropower pricing for smelters

Hydropower, in contrast to hydroenergy, is shown to be governed by depletion pricing: its real price is theoretically subject to a secular rise at the real social rate of discount. The alternative is to charge the equivalent constant cost for long term contracts with major consumers such as local authorities and smelters. Contract prices will therefore be above current marginal power cost in the initial phase and below it in the final phase of the contract.