2876. Forward electricity market with nonconvexities
Invited abstract in session WA-44: Forecasting methods and electricity markets, stream Energy Economics & Management.
Wednesday, 8:30-10:00Room: Newlyn 1.01
Authors (first author is the speaker)
| 1. | Quentin Lété
|
| CORE, UCLouvain | |
| 2. | Thomas Hübner
|
| ETH Zürich |
Abstract
Thermal generators must decide whether to produce electricity well in advance, as starting up or shutting down operations require lead time. By participating in forward auctions, like day-ahead or intraday auctions, they can lock in prices, ensuring that they will not make a loss when committing to produce power in the future. Their participation leads to the auction turning nonconvex as thermal generators must communicate indivisible fixed costs associated with start-up and shut-down operations. How to price electricity in such a nonconvex auction is a long-standing debate, but a consensus seems to be emerging towards convex hull pricing. However, most existing literature studies the nonconvex forward market in isolation, ignoring the relationship with the convex real-time market. In this talk, we propose a model to study nonconvex pricing in two-settlement markets, accounting for both day-ahead and real-time markets with financial participants. We show on an illustrative example that, in this case, most of the theoretical properties of convex hull pricing (efficiency and loss opportunity costs minimization) cease to hold. We then present simulation results on a case study calibrated on the PJM market.
Keywords
- Electricity Markets
Status: accepted
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