Texas_Bidding_part1

Texas_Bidding_part1 - Profit-Maximizing Bidding into Texas...

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Profit-Maximizing Bidding into Texas Electricity Market
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How the Electricity Market Works in Texas • (1) Individually negotiated (bilateral) trades – Example: West Texas Utilities agrees to sell City of College Station 500 megawatts (MW) of electricity every hour for $40/MWh – 95-98% of all electricity in TX traded bilaterally – On the day before it happens, the buyer & seller schedule for the power to be “transported” on electricity transmission grid
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How the market works (contd) • (2) Spot market auction is run for the remaining 2-5% of trades – Example 1: hotter/colder than forecasted so more/less power needed – Example 2: a powerplant has an outage so more power needed from elsewhere – Market run with an auction – There are several large and many small firms – Money on table = $100-$4000 per hour depending upon size
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How the Spot Auction Works • Firms bid “supply functions” for each hour of day • All suppliers bidding below p* will produce and get paid p* for each unit it produces Firm 1 Firm 2 Total Supply Bid Total Demand P*
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Texas_Bidding_part1 - Profit-Maximizing Bidding into Texas...

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