Analyze the bilateral transaction versus a market auction

Reference no: EM131326241

You are asked to analyze the bilateral transaction versus a market auction for the three-bus system.

(Figure 11.10):

901_Bus system.jpg

The Green Load at bus 2 is trying to buy 500MW and would like to buy from the Hydro Generator on bus 1. The Green Load trading group calls up the Hydro Generator trading group and asks for a price for 500MW. The Hydro Generator Trading Group asks a price of 60 $/MWh. The hydro group has to pay the transmission charges for any contract. The traders at Green Load trading think that this price is too high and say "no thanks-we will take our chances in the Market". Green Trading then puts in a bid. Green trading analyzes past market results and put in a bid that will result, it believes, in 500MW total load delivered at a price below the bilateral price it got from the Hydro group. So Green trading puts in a bid of 50 $/ MWh for the 500MW.

Bilateral Transaction Case: In this case the transaction is done completely outside the market and only the MW transaction is superimposed onto the transmission system. The price for the MW sold to Green Trading Group by the Hydro Generator is 60 $/MWh. The generator has to pay any transmission charges determined by the results of the auction.

The results are (Figure 11.11):
Market case: Here the Hydro Generator trading group places a bid to sell power. This is done by giving a cost function to the auction operator of

C(P_hydro) = 0 + 60P_hydro + 0.002 P²_hydro

for 0<= P_hydro <= 500 MW

The Green Load submits a bid to buy function of

C(P_green) = 0-50P_green for 0<=P_green<=500 MW

The other generator cost functions and the cost functions of the loads are as follows:

Bid	A	8	C	*Max (MW)*
Gen 1	0.0	20	0.005	1100
Gen 2	0.0	5	0.0025	1100
Gen 3	0.0	50	0.02	1100
Load 2	0.0	-100	0	1500
Load 3	0.0	-100	0	1000

The market auction results with the Hydro Generator and the Green Load as part of the market are (Figure 11.12):

421_Figure 1.jpg

Note that the Hydro Generator only sells 45.5MW and the Green Load receives nothing.

Find the following:
1. The student should plot the demand and supply curves for the market case. Does this help to see why the result is as shown?

2. For the Bilateral case: The dollar income received by the Hydro Generator, the transmission charges, and the net income of the Hydro Generator.

3. For the Bilateral case: The dollars paid by the Green Load.

4. For the Market case: The dollar income received by the Hydro Generator.

5. In this case, we know that the Green Load had the opportunity to make the transaction with the Hydro Generator and chose to go into the Market. Was the Green Load's decision good for the Hydro Generator?

Reference no: EM131326241

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