UNCERTAINTY IN THE ELECTRIC POWER INDUSTRY Methods and Models for Decision Support

Transcription

1 UNCERTAINTY IN THE ELECTRIC POWER INDUSTRY Methods and Models for Decision Support CHRISTOPH WEBER University of Stuttgart, Institute for Energy Economics and Rational of Use of Energy fyj. Springer

2 Contents CONTENTS LIST OF FIGURES LIST OF TABLES PREFACE ACKNOWLEDGMENTS Chapter 1 INTRODUCTION VII XIII XIX XXI XXIII l Chapter 2 DEREGULATION AND MARKETS IN THE ELECTRICITY INDUSTRY 3 1. Status of deregulation 4 2. Power and related markets in continental Europe 8 Chapter 3 DECISION MAKING AND UNCERTAINTIES IN THE ELECTRICITY INDUSTRY Decision problems in the electricity industry Uncertainties in the electricity industry Market prices for primary energy carriers Product prices for electricity Availability of plants Behavior of competitors Demand growth Technology development Regulatory and political uncertainties 21

3 Vlll 3. Formal framework Formulating decision problems under uncertainty Describing uncertain parameters Random variables Stochastic processes Models for decision support under uncertainty Measuring model quality 27 Chapter 4 MODELLING ELECTRICITY PRICES Fundamental models Basic model: cost minimization under load constraint and merit order Transmission constraints Hydro plants Start-up costs and minimum operation/shut-down time Reserve power markets Implications and challenges Finance and econometric models Basic models Geometric Brownian motion Mean-Reversion models Jump-Diffusion models Deterministic and cyclical effects Advanced stochastic models ARMA models GARCH models Mixture distributions Markov regime switching Transformed diffusion model Multifactor models Integrated modeling approach Primary energy prices: stochastic model Electricity prices: fundamental model Electricity prices: stochastic model Application 73 Chapter 5 MODELING COMPETITION IN THE ELECTRICITY INDUSTRY Competition on the wholesale market: Cournot-Nash competition and competition with bid curves Competition on the retail market: Bertrand competition and competition with heterogeneous products 80

4 Detailed Contents ix 2.1 Methodological approach - basic model with one retail market Methodological approach - extension to several retail segments Analytical results - attractiveness of various market segments Application Market description Results 93 Chapter 6 OPTIMIZING GENERATION AND TRADING PORTFOLIOS Technical elements for production scheduling Fuel consumption and capacity restrictions for conventional power plants and boilers Start-up, shut-down and ramping constraints Back-pressure steam turbines Extraction condensing steam turbine Gas turbine and gas motor System-wide restrictions and objective function Balance of supply and demand Objective function Problem structure and possible simplifications Separable optimization with uncertain prices - real option model Basic models Thermal power plants as path-dependent American options Model of Tseng and Barz Use of lattices generated from Monte-Carlo simulations Adaptation to day-ahead-trading markets Two-stage optimization problem in day-ahead markets including CHP Longer-term portfolio management Application Portfolio description Thermal power plants without cogeneration Cogeneration system Real options approach Two stage optimization Longer Term Portfolio Management 143

5 X Chapter 7 RISK MANAGEMENT AND RISK CONTROLLING Typology of risks Market risks Other external risks Internal risks Aggregate risk measures Value at risk Alternative concepts for market risk Alternative statistical risk measures Integral earnings at risk Integral earnings at risk and risk management strategies in incomplete electricity markets Price models for risk controlling Multivariate GARCH models Multivariate models with regime switching Power plant models for risk quantification Delivery risk - including analytical model for CHP valuation Short-term risk Application Computation methodology Portfolio description Results Delivery risk Short-term risk Integral earnings at risk 193 Chapter 8 TECHNOLOGY ASSESSMENT - WITH APPLICATION TO FUEL CELLS Analysis of the state of the art Technology developments in the middle and longer term Upscaling and hybrid systems Use of solid fuels Multistage system concepts Cost development Learning and experience curves - conceptual basis Experience curves as a forecasting tool Dependency of the experience curves on the development stage Ex-post observations of cost reductions for stationary fuel cell systems 209

6 Detailed Contents xi 3.5 Projection of experience curves for different technology lines Assessment of context factors and resulting technology potentials Energy demand structure Operation simulation Principles of operation simulation Aggregated utilization potentials in Baden- Wurttemberg Sensitivity analyses Identifying technology strategies 226 Chapter 9 INVESTMENT DECISIONS Static, deterministic long-term market equilibrium - the concept of peak load pricing Stochastic fluctuations in the electric load Stochastic fluctuations in the primary energy prices Dynamic stochastic long-term price equilibria - a backward induction approach Basic problem Two-stage example General solution approach Application Case study analyzed Results 265 Chapter 10 FINAL REMARKS 271 REFERENCES 275 INDEX 291