Insights from Actual Day-Ahead Bidding of Hydropower

Erik Nicholas Alnæs; Roger Grøndahl; Stein-Erik Fleten; Trine Krogh Boomsma

doi:10.5278/ijsepm.2015.7.4

Insights from Actual Day-Ahead Bidding of Hydropower

Erik Nicholas Alnæs, Roger Grøndahl, Stein-Erik Fleten, Trine Krogh Boomsma

Department of Mathematical Sciences

5 Citations (Scopus)

Abstract

We analyse bidding behavior in the Nordic electricity market, where producers submit supply schedules for tomorrow’s generation in a day-ahead auction. We use the two-stage stochastic mixed-integer linear program of Fleten and Kristoffersen (2007) [9] to generate efficient bids to assist in the analysis. These bids are compared to those submitted by three Nordic reservoir hydropower producers over four two week periods in 2011. Being price takers, the producers maximize their profits by bidding their marginal cost. We find that the hydropower producers often come close to the model-optimal result. However, not all marginal costs are taken into account, possibly leading to overproduction at low prices. Marginal costs seem in some cases to be overestimated at high production levels, leading to underproduction in those situations.

Original language	English
Journal	International Journal of Sustainable Energy Planning and Management
Volume	7
Pages (from-to)	37-58
ISSN	2246-2929
DOIs	https://doi.org/10.5278/ijsepm.2015.7.4
Publication status	Published - 2015

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title = "Insights from Actual Day-Ahead Bidding of Hydropower",

abstract = "We analyse bidding behavior in the Nordic electricity market, where producers submit supply schedules for tomorrow{\textquoteright}s generation in a day-ahead auction. We use the two-stage stochastic mixed-integer linear program of Fleten and Kristoffersen (2007) [9] to generate efficient bids to assist in the analysis. These bids are compared to those submitted by three Nordic reservoir hydropower producers over four two week periods in 2011. Being price takers, the producers maximize their profits by bidding their marginal cost. We find that the hydropower producers often come close to the model-optimal result. However, not all marginal costs are taken into account, possibly leading to overproduction at low prices. Marginal costs seem in some cases to be overestimated at high production levels, leading to underproduction in those situations.",

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T1 - Insights from Actual Day-Ahead Bidding of Hydropower

AU - Alnæs, Erik Nicholas

AU - Grøndahl, Roger

AU - Fleten, Stein-Erik

AU - Boomsma, Trine Krogh

PY - 2015

Y1 - 2015

N2 - We analyse bidding behavior in the Nordic electricity market, where producers submit supply schedules for tomorrow’s generation in a day-ahead auction. We use the two-stage stochastic mixed-integer linear program of Fleten and Kristoffersen (2007) [9] to generate efficient bids to assist in the analysis. These bids are compared to those submitted by three Nordic reservoir hydropower producers over four two week periods in 2011. Being price takers, the producers maximize their profits by bidding their marginal cost. We find that the hydropower producers often come close to the model-optimal result. However, not all marginal costs are taken into account, possibly leading to overproduction at low prices. Marginal costs seem in some cases to be overestimated at high production levels, leading to underproduction in those situations.

AB - We analyse bidding behavior in the Nordic electricity market, where producers submit supply schedules for tomorrow’s generation in a day-ahead auction. We use the two-stage stochastic mixed-integer linear program of Fleten and Kristoffersen (2007) [9] to generate efficient bids to assist in the analysis. These bids are compared to those submitted by three Nordic reservoir hydropower producers over four two week periods in 2011. Being price takers, the producers maximize their profits by bidding their marginal cost. We find that the hydropower producers often come close to the model-optimal result. However, not all marginal costs are taken into account, possibly leading to overproduction at low prices. Marginal costs seem in some cases to be overestimated at high production levels, leading to underproduction in those situations.

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DO - 10.5278/ijsepm.2015.7.4

M3 - Journal article

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SP - 37

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JO - International Journal of Sustainable Energy Planning and Management

JF - International Journal of Sustainable Energy Planning and Management

ER -

Insights from Actual Day-Ahead Bidding of Hydropower

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