Conference Papers
E. Grant Read, An Expanded Co-optimisation Formulation for New Zealand's Electricity Market. Presented to the Operational Research Society of New Zealand Conference, Wellington New Zealand, November 2008.
Abstract
New Zealand pioneered the use of LP to clear electricity markets, and particularly the concept of co-optimising energy and ancillary service markets. Other markets have adopted the concept, and applied it to a wider range of ancillary services. It is now time to ask whether the New Zealand market formulation should be expanded to include some of those generalisations. Here we present a formulation designed to account for the limitations imposed by the inter-island HVDC link on inter-island trading of ancillary services.
Full text (PDF, 175 KB)
E. Grant Read, An LP Formulation for Inter-Island Trading of Regulation Services. Presented to EPOC Winter Workshop, Auckland, New Zealand, September 2008.
Abstract
New Zealand pioneered the concept of co-optimising energy and ancillary service markets, but other markets have expanded that concept to include co-optimisation of other services including "frequency keeping" or "regulation". Implementing a regulation market would require installation of some form of Automatic Generation Control, and modification of the LP currently used to clear energy and ancillary service markets. Here we focus on development of an LP formulation that would allow regulation services to be traded across the inter-island HVDC link. But first we must discuss how either "sharing" or "transfer" of regulation services would actually be implemented on the HVDC, and what kind of benefits might ensue.
Full text (PDF, 184 KB)
P. A. Stewart, R. J. W. James and E. G. Read, Intertemporal Considerations for Supply Offer Development in Deregulated Electricity Markets. In Proceedings of the International Association for Energy Economics 6th European Energy Conference: "Modelling in Energy Economics and Policy", Zurich (Switzerland), September 2004.
Abstract
The literature refers to several methods for developing supply offers for generators in wholesale electricity markets, all of which consider much more simplified environments than those that occur in reality. In particular, we consider the approach suggested by members of the Electric Power Optimisation Centre, which involves forecasting and updating a "market distribution function". The market distribution function describes the probability that a section of an offer curve at any point within the likely ranges of (price, quantity) offering space will be accepted by the market. This function is then used to produce an optimal offer.
The focus of this paper is the construction of offers and offering strategies that consider intertemporal linkages, particularly those that arise in hydroelectric systems or fuel-constrained thermal units. The main linkages considered here are limited water availability over time, hydro inflows, and hydro reservoir storage bounds, while start-up and shut-down costs, ramp-rate restrictions, and the behaviours of other participants in the offering process over time are considered in ongoing research. To date, the work of Philpott and Anderson produces offers for single periods only. None of the intertemporal characteristics and restrictions of the generation units are considered, and thus the offers may not be optimal when viewed over several periods.
It can be shown, for example, that when stochastic intertemporal effects are taken into account, the "optimal" offer from a hydro system will not necessarily be monotonically non-decreasing, as generally is required by market rules. It is also apparent that the optimal form of offers will change as real-time is approached and various uncertainties are resolved. Clearly, these issues require modification of the market distribution function approach, which doesn't account for these intertemporal characteristics. We therefore examine practical methods for applying market distribution functions to these problems.
Full text (PDF, 836 KB)
J. P. Tipping, D. C. McNickle and E. G. Read, The Incorporation of Hydro Storage into a Spot Price Model for the New Zealand Electricity Market. In Proceedings of the International Association for Energy Economics 6th European Energy Conference: "Modelling in Energy Economics and Policy", Zurich (Switzerland), September 2004.
Abstract
Recent econometric models of spot market prices are particularly well-suited for thermal-dominated systems, in which extreme short-term price volatility and strong mean-reversion are dominant characteristics. In order for a purely econometric price model to perform well in the context of the New Zealand market, which is dominated by hydro generation, it needs to be modified to incorporate the physical factors that influence the price level. Hydrological factors, such as storage levels and inflows, are major drivers of hydro generator behaviour. Assuming that generators use modern reservoir management optimisations, both factors are taken into account in the calculation of marginal water values (MWVs), which, theoretically, form the basis of their supply offers. However, the MWVs are assessed internally and are not public knowledge; therefore some proxy for the MWV is required for modelling spot prices.
We compare the estimated parameters of a leading econometric model when fitted to two spot price time series from the New Zealand Electricity Market, to show how water-shortages leading to high prices can complicate the price-modelling process. We then use reservoir management theory to extend the price model. The storage level is transformed into a crude measure of the MWV, and incorporated into the model as the major driver of the deterministic price level. Our analysis shows that underlying spot price levels in New Zealand (especially during dry years) can be modelled with increased accuracy when the storage level is included in the price model.
Full text (PDF, 463 KB)
J.A. George, E.G. Read and A.S. Duffy “Using Cournot Gaming Models for Deciding Vesting Contracts for an Emerging Electricity Market” ORSNZ Proceedings, 2001, p295
S. R. J. Batstone, An Equilibrium Model of an Imperfect Electricity Market. In Proceedings of the 35th ORSNZ Conference, University of Victoria, Wellington (New Zealand), 169-178.
Abstract
Electricity generators in most deregulated markets simultaneously operate in both financial (contract) and physical (spot) markets. Decisions in each of these markets are not mutually exclusive, and in the case of imperfectly competitive scenarios generating companies can use their market power to influence spot and contract prices. A model of oligopolistic market equilibrium is presented where the relationship between physical and financial markets is based on the impact spot prices and the variance of spot prices have on contract demand. Risk averse consumers are assumed to maximise a mean-variance utility in purchasing contracts, while risk neutral generators face uncertain input costs and compete with Cournot conjectures in the physical market. Results are presented that show incentives exist for generators to amplify cost variations/uncertainties in their quantity bids, in order to extract higher contract prices out of consumers.
Full text (PDF, 176 KB)
E. G. Read and D. Chattopadhyay, Electricity Market Models: Primal/Dual Formulation Issues. In Proceedings of the 35th ORSNZ Conference, University of Victoria, Wellington (New Zealand), December 2000, 157.
B. B. Chakrabarti, E. G. Read and D. Chattopadhyay, Optimal Reactive Power Management in Electric Power Systems. In Proceedings of the 35th ORSNZ Conference, University of Victoria, Wellington (New Zealand), December 2000, 75.
E. G. Read, Dual OR: a Partial Paradigm for the Future?. In Proceedings of the 34th ORSNZ Conference, University of Waikato, Hamilton (New Zealand), December 1999, 255-264.
Abstract
Over the past few years many authors have documented the demise of some traditional forms of OR practice. But at the same time, significant success has been reported in other areas. It is suggested that this pattern of failure and success reflects the degree to which OR has proved adaptable to a shift away from a reliance on top-down planning, toward reliance on pricing mechanisms; that is from a "primal" to a "dual" orientation, both in business and in Government. If so, this suggests significant potential in the adoption of a Dual OR paradigm which emphasises the use of OR to create and support "market" structures within which independent decision-makers can operate. Conversely, though, the OR profession must ask whether its current tool-kit is really adequate to the job ahead.
Full text (PDF, 44 KB)
E. G. Read and D. Chattopadhyay, Electricity market models: Lessons from Australasian experience. In Proceedings of the 34th ORSNZ Conference, University of Waikato, Hamilton (New Zealand), December 1999, 33-42.
Abstract
Market clearing models based on Linear Programming are being adopted in a number of electricity markets in different countries, with New Zealand and Australia being among the pioneers in this respect. This represents an exciting development for OR, worldwide, not only because these models are controlling a sector of vital national importance, but because large sums of money are being traded, virtually in real time, on the basis of model results. Here we reflect on experience with these models, draw out some lessons, and discuss the implications of these developments for OR practice in the sector, and elsewhere.
Full text (PDF, 44 KB).
A. L. Kerr, Utility maximising stochastic dynamic programming: An overview. In Proceedings of the 34th ORSNZ Conference, University of Waikato, Hamilton (New Zealand), December 1999, 59-68.
Abstract
Many real world problems involve making repeated decisions over time in an uncertain environment. These decisions often involve a trade-off between some immediate benefit(s) and possible future benefit(s), and also take in to account the impact the decision will have on future decisions and benefits. Stochastic dynamic programming (SDP) is often used to analyse problems of this type and the objective is often to maximise the expected value of benefits, which can imply that the decision-maker is 'risk neutral'. But is this appropriate? In this paper a SDP formulation is described which accommodates risk attitudes via a utility function. The approach is discussed and illustrated for stochastic reservoir management and stochastic route choice problems.
Full text (PDF, 180 KB)
M. G. Duncan, Deregulation in the New Zealand Electricity Industry: Cases of Anticipatory and Reactive Change. In Proceedings of Organisations Looking Ahead: Challenges and Directions, Griffith University (Brisbane), November 1999.
Abstract
The past decade has borne witness to a series of legislated changes corporatising and redefining the operating environment of New Zealand's electricity industry. Driven by a desire to enhance New Zealand's attractiveness to industry on a global scale, these discontinuous and controversial changes have created a newly competitive environment that has forced electricity companies to rethink entrenched structural and strategic norms. Yet despite similarities in strategy, structure and of course product, individual electricity companies have developed in an idiosyncratic manner that has resulted in visibly distinct change processes. In this study the variables determining different organisational strategic change approaches (anticipatory, reactive) in a time of discontinuous change are examined. In an exploratory study utilising the theories of Nadler and Tushman (1990) and qualitative method of within- and cross case analysis, the cases of two New Zealand electricity distribution companies are discussed. Illustrative of reactive and anticipatory strategic change, the findings enhance previous research and the implications to change management are discussed.
Full text (PDF, 33 KB).
A. L. Kerr, E. G. Read, and R. J. Kaye, Revenue maximising reservoir management with risk attitudes. Spring 1999 INFORMS Conference, Cincinnati (OH), May 1999.
S. R. J. Batstone and T. J. Scott, Long-term Contracting in a Deregulated Electricity Industry: Simulation Results from a Hydro Management Model. In Proceedings of the 33rd ORSNZ Conference, University of Auckland (New Zealand), August 1998, 147-156. Full text (PDF, 110 KB)
G. J. Bell, Concave Envelope Analysis in Nonconvex Optimisation. In Proceedings of the 33rd ORSNZ Conference, University of Auckland (New Zealand), August 1998, 222-231. Full text (PDF, 147 KB)
G. J. Bell, D. Chattophadhyay, and E. G. Read, Analysis of Non-physical Dispatch in the Gas and Electricity Pricing Models. In Proceedings of the 33rd ORSNZ Conference, University of Auckland (New Zealand), August 1998, p. 145-146. Full text (PDF, 70 KB)
A. L. Kerr, E. G. Read, and R. J. Kaye, Reservoir Management with Risk Aversion. In Proceedings of the 33rd ORSNZ Conference, University of Auckland (New Zealand), August 1998, 167-176.
Abstract
We consider the problem faced by a manager planning the operation of a mixed hydro/thermal system, where the manager controls the reservoir release made in each week (single reservoir), as well as the generation from other sources. Demand is deterministic and must be met in each period, while the inflows experienced in each week are uncertain. Stochastic Dynamic Programming (SDP) is a technique often applied to reservoir management problems, with the scheduling horizon divided naturally into discrete time periods, storage as the state variable, and release as the decision variable. If the objective is to minimise the expected annual cost, then a large number of observations with low costs can cancel out a few observations with large costs (because all outcomes are weighted equally). In reality, the manager might want to be able to trade-off a reduction in extremely good outcomes for an improvement in extremely bad outcomes ie, putting more 'weight' on the bad outcomes, but this invalidates the standard dynamic programming recursive relationship. We describe a SDP formulation which accommodates a non-linear end-of-horizon utility function by augmenting the state space. We describe some simple algorithmic modifications which significantly reduce the computational requirements of the optimisation, and illustrate the impact of risk averse attitudes on system performance.
Full text (PDF, 603 KB).
A. L. Kerr and E. G. Read, Short-term Hydro Scheduling Using Integer Programming: Management and Modelling Issues. In Proceedings of 32nd Annual ORSNZ Conference, University of Canterbury (New Zealand), August 1996, 111.
Abstract
The scheduling of hydro stations has stochastic, integer, non-linear, and continuous time aspects, with all the approaches described to date making some simplifying assumption about one or other of these aspects. The (integer) unit commitment decision has received relatively little attention, partly because the resulting problem was deemed intractable given the potential gains in efficiency. However, with the advent of deregulated energy markets, the implications of ignoring these integer effects may be costly, and so they must be considered in some way. We discuss some of the managerial and modelling issues relating to this problem and some ideas for heuristics that incorporate management priorities into an Integer Programming framework.
Full text (PDF, 79 KB).