Publication

Modelling generation capacity margin as a dynamic control problem

2006
Conference paper
Abstract

In this paper generation investment process in a liberalised electricity market is simulated as a dynamic control problem with prices, both current and predicted, acting as a feedback variable. Market price is modelled as a function of the capacity margin only. We model an energy-only market, with no capacity payments. The model includes different power plant types with different investment lags, lumpy investment, possibility of mothballing and different investment behaviour. It is shown that the modelled market itself cannot guarantee a sufficient capacity margin and exhibits an oscillatory behaviour

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Electricity market
In a broad sense, an electricity market is a system that facilitates the exchange of electricity-related goods and services. During more than a century of evolution of the electric power industry, the economics of the electricity markets had undergone enormous changes for reasons ranging from the technological advances on supply and demand sides to politics and ideology.
Free market
In economics, a free market is an economic system in which the prices of goods and services are determined by supply and demand expressed by sellers and buyers. Such markets, as modeled, operate without the intervention of government or any other external authority. Proponents of the free market as a normative ideal contrast it with a regulated market, in which a government intervenes in supply and demand by means of various methods such as taxes or regulations.
Market economy
A market economy is an economic system in which the decisions regarding investment, production and distribution to the consumers are guided by the price signals created by the forces of supply and demand. The major characteristic of a market economy is the existence of factor markets that play a dominant role in the allocation of capital and the factors of production.
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