EMK:Water Values and Hydro Offers

Disclaimer

Reasonable care has been taken to ensure that the information in this paper is up to date at the time of issue. Potential users of EMarket should, however, ensure that they evaluate EMarket and this paper through an appropriate evaluation process in consultation with Energy Link. The authors are also reliant on certain information external to EMarket and Energy Link, for which no liability or responsibility can be accepted.

Introduction

This technical bulletin is intended to provide users and interested parties with a detailed explanation of how EMarket’s water values are calculated and applied. EMarket was designed as a market simulation model rather than as an operational model and the algorithm developed by Energy Link for use in EMarket was designed to give a high degree of accuracy at high speed for this purpose. Speed of operation is a strength of EMarket and ensures that users can turn new or modified simulations around very quickly, achieving high levels of productivity.

EMarket is also a very flexible model which allows, for example, simulation runs to combine weekly, day-night and half hourly dispatches within one simulation run. This paper includes a brief overview of other features in EMarket.

Other Documents

This bulletin is one of a series of technical bulletins relating to Energy Link’s EMarket model. Taken together, the bulletins replace the old EMarket User Guide. The full series of bulletins covers an overview of the EMarket model, the details of the four major New Zealand hydro systems modelled in EMarket, water values and hydro offers, power flows, dispatch and nodal pricing, short term river chain optimisation and company optimisation.

Summary

The manager of a hydro system in New Zealand must deal with the prospect of uncertain inflows, concern about ensuring security of supply in a dry year, and how to maximise the value of water in the reservoir at any point in the year.

The concept of a marginal water value is useful in this context and defines the expected future value of the next cubic meter of water arriving in storage for generation. The water values calculated by EMarket and used in its full simulation runs are stored and viewed as water value contours, or curves of constant water value on a chart of storage versus time. Contour values are chosen to match the offer prices of thermal plant configured in each run.

EMarket’s water values have the following property: if the contour price is Pc then if the inflow scenarios entered into EMarket are projected forward using market dispatch with hydro offers at the constant value Pc, the number of scenarios that hit the bottom of the reservoir is equal to <math>\sqrt{2}</math> Template:Math