EMK:Company Optimisation in EMarket

Introduction

This technical bulletin is intended to provide users and interested parties with a detailed explanation of how EMarket’s company optimisation feature works.

This paper includes a brief overview of other features in EMarket and a note on enhancements planned in the short to medium term.

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.

Company Optimisation

EMarket is designed to produce stable offering schemes for generation that are, in principle, based on static short or long run marginal costs for each generator. However, when a company owning a generation, retail and hedge portfolio is considered then the optimal offering behaviour for that company as a whole will affect the value of each generation offer. EMarket can now adjust offers to simulate this behaviour, which is called Company Optimisation (CO).

Market Sensitivity

Market sensitivity is loosely defined as the change in price that can be affected by removing or adding generation to the available supply. On an incremental basis, given a supply curve P(s), where P(s) is the price at which a supply of generation s is available, then market sensitivity can be defined as

or the negative derivative of the supply curve.

In practice the supply curve is a lumpy, non-differentiable curve and is not all that useful. In the following analysis we look for more general and approximate relationships between supply and price.