Development of an electricity market model based on short-term power plant recruitment in liberalized market conditions

Abstract: Deregulated electricity markets enable power generation resources to be allocated efficiently in the short-term through competitive bidding on the power exchange, thus resulting in the lowest generation cost possible given the power plants currently available. With increasing shares of intermittent power sources and prospects of substantial changes in baseload power, as seen recently in Sweden, it is of interest to be able to predict electricity market outcomes given certain changes in the power system. For example, in light of new power plant investments, a changed future power mix may impact the potential for specific power plants or technologies to be recruited in the market clearing process, thus affecting the overall profitability of said plant. Based on previous foundational work on the electricity market simulation tool EDGESIM, this report describes the refinement and development of a detailed electricity market model, with the emphasis of creating an accurate representation of the Nordic power market. Using Sweden as the primary area of focus, the model was set up to replicate the Nord Pool power exchange and validated against historical market data from the Swedish price areas in the Nordic market. Overall, the model reproduced market outcomes relatively accurately, with cases reaching as low as 8% average deviation in the Swedish market as a whole (per hour and per week) over the simulated period. This was achieved through the implementation of, primarily, detailed hydro reservoir modeling, technical constraints on different power generation technologies and systematic outage handling. Furthermore, a preliminary future scenario forecast of the Swedish electricity system and its energy mix was simulated using the new EDGESIM model developed.