Delays in electricity market models

Abstract

From several types of material delays that can be found in literature, most System Dynamics (SD) modelers select, apparently for simplicity, first-order delays (FODs) to represent the construction and decommissioning of power plants in electricity market models, even though pipeline delays, or transport delays (PLDs) model better the entry and exit of power plants. Although both types of delays can be used for representing material delays, each one offers different results with pros and cons that need to be well considered. Therefore, this paper seeks to implement FODs and PLDs in a generic electricity market model in order to assess their effectiveness and adequacy in the closest representation of the reality. As a result, SD modelers shall see through this investigation the importance and implications of material delays in their models, but also they will be able to choose the appropriate material delays for their applications. In fact, the simulation results comparing both models markedly show that PLDs are a better approximation to model the delays of construction of new plants as well as the retirement of old plants. Accordingly, if FODs are solely used, the electricity market models not only always provide less electricity in one or various years, they also produce inaccurate values that can lead to a dangerous energy planning, mainly because they modify the dynamics of the entire system.