Abstract
Modern power markets often consist of a series of sequential markets where power is traded. Market agents must coordinate their trading strategy across all markets. In this paper, we formulate the mult-market bidding problem for power producers as a stochastic program. This formulation is implemented within the framework of optimization models used by the Nordic hydropower industry. We also present how input to the stochastic program may be generated by using a forecast-based scenario generation method combined with time-series models that predicts future prices and turnovers in the markets. The model is applied in a case study to investigate the value of participating in the Nordic day-ahead and balancing market. A producer may participate in the balancing market either by considering the markets sequentially or coordinated. Using cases with limited and perfect information about the balancing market to calculate lower and upper bounds, we find that the value of participating in the balancing market using the sequential approach is between 0.8 and 2.6%. Using the coordinated approach, the producer may gain between 1.4 and 2.9%. The value of coordination, i.e. the value of using the coordinated over the sequential approach, is found to be higher in the limited information case (1.7%) than in the perfect information case (1.1%). This indicates that, the more uncertainty, the higher is the value of coordination.
Highlights
Modern, deregulated power markets often consist of a series of markets where power is traded
The value of coordination, i.e. the value of using the coordinated over the sequential approach, is found to be higher in the limited information case (1.7%) than in the perfect information case (1.1%)
The formulation is implemented within the framework of optimization models that is used by the Nordic hydropower industry
Summary
Modern, deregulated power markets often consist of a series of markets where power is traded. This paper presents how coordination of trades across multiple markets may be formulated within the framework of the optimization models used by the Nordic hydropower industry [1]. Bounds on the potential added value for market agents that participate in the Nordic day-ahead and balancing market are calculated in [2]. They find a gain of participating in the balancing market that varies from 9.60 to 30.79% over the months of the year. Time-series models for the prices in the Nordic day-ahead and balancing market are applied to generate forecasts that are used together with the forecast-based scenario generation method to generate scenarios trees.
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