An Energetic Exposition: notes about electricity markets

Melbourne Terminal substation

Electricity markets can be quite complex. They have many features which are rarely discussed in econ 101. For instance, my microeconomics textbook has three chapters on the environment, pollution and natural resources (it’s a bit lefty) but has a single reference to energy and none to electricity. Let me clarify that in 2009, the subsidy for renewables amounted to 4 billion USD, while fossil fuels received an astonishing subsidy of 550 billion USD.

some history

It is trite to note that electricity is always present in modern life, yet we infrequently contemplate it. We might say that there are historical three major applications which have driven the mass-adoption of electricity:1. lighting 2. electric engine - our primary engine with which we are familiar is the ICE engine, but electric engines made the impact on manufacturing first and then to consumer devices. We use the mechanical energy from an electric energy in a washing machine or drill. But indirectly through the motor in the compressor forcing coolant through a heat exchange in a refrigerator, be it our home fridge or air-con system. 3. portability of energy - surprising, as I think of internal combustion engines as the primary mode of transport for most of the 20th century, but this is very passenger centric. A very popular mode of transport (for goods, not people) has been the diesel trains or, more properly, diesel-electric transmissions. These use diesel engines to generate electricity, which is then used to power electric motors which have been popular with trains, ships and submarines.

generation and usage

Electricity must be generated. Electricity generators are the cause of much global warming.

energy and electricity are obvious different, but the discussion is linked since some things are do not have direct electricity use but are still energy intensive e.g. - transport - heating

In, 2020-2021 Australian final energy consumption totaled 4121.9 PJ, and is broken down as follows:

Coal: 2.5% Natural gas: 24.1% refined products: 48.4% electricity: 20.7% generated from coal: 11% generated from gas: 3.9% generated from oil: 0.4% generated from renewables: 5.5% renewables: 4.3%

notes: renewables includs bioenergy( mostly bagaasse, biogas, and wood)

How does compare with other countries? We can divide countries up into 4 categories based on their income level: - high income countries (worldbank gni per capita >= 13,846) Australia pop 25.7m, energy 237,000 GWh/yr, 9,200 kwh/yr, 57,000 gni 2022 19th in energy consumption, 53th in population

https://www.worldbank.org/en/country/mic/overview

basic properties of electricity

resistance current voltage

resistivity vs resistance conductivity vs conductance

load

P = RI*2

power energy work

frequency phase active power reactive power apparent power/ powerfactor

Markets I

the electricity supply chain: - generation - transmission - distribution - retailing - dispatching

market structures: * monopoly * monopsony (independent power producers) - owenership unbundling - tolling agreements - virtual power plants * wholesale - grid operator - distribution companies - organised by pool market or power exchange - pool market - uniform price - central entitiy matches bids and offers - spot market or market coupling - power exchange () - real-time price variation - price determined through trading, not central entity - clearing price determing - not necessarily phyusical exchange of - like stock exchange - includes derivatives (futures, options, swaps)

Markets II: generation

a simple model for cost is as follows:

C_i (Q_i) = FC_i + Fl_f *a_{f,i} * Q_i

and

Q_i_subbar and Q_i_superbar are the upper production limits of powerplant i so Q_i_subbar <= Q_i <= Q_i_superbar

where * C_i is cost of powerplant i * Q_i is the energy output of powerplant i * FC_i is the fixed cost of powerplant i * Fl_f is the fuel cost of powerplant i * a_{f,i} is energy efficiency of the plant

this says very little about the technologies

we could have term quadratic term in Q_i, which would be a good model for a gas turbine, but not for a hydro plant. - quasi-fixed costs: - no-load costs - start-up costs (hydro plants minutes,, thermal power hours)

Markets III: computational complexities

prototypical problems I: DC optimal power flow

min ∑ c_i P_{G_i} s.t. P minGi ≤ PGi ≤ P maxGi B · θ = P_G − P_D |θi − θj |/xij ≤ Pij,max

power flow study

https://docs.mosek.com/slides/2018/dtu-electric/talk.pdf

prototypical problems II: Unit commitment problem

a mixed-integer conic quadratic optimization problem

https://nbviewer.org/github/MOSEK/Tutorials/blob/master/unitcommitment/ucp.ipynb

prototypical problems III: resource planning

https://github.com/Power-Systems-Optimization-Course/power-systems-optimization/blob/master/Notebooks/03-Basic-Capacity-Expansion.ipynb

references