Further development and verification of the market simulator

Challenge

The electricity market is the focal point of the green transition. In connection with electrification, many investment decisions must be made, with the biggest risk factor lying in the uncertainty regarding how electricity prices will evolve in the future. The Power Market Simulator (PMS) is a computational tool that generates increased knowledge about the electricity market. PMS can help improve the understanding of the electricity market and enhance the decision-making basis for future investments in the green transition. Unlike other market models, PMS can be used by non-experts in IT models and calculates very quickly, allowing users to analyze many different market situations. The challenge is that the solution model in PMS is not scientifically documented, meaning users have no guarantee of the quality of the calculations. Therefore, a key part of PMS's marketing will be to reference a scientific test of the model in the marketing material. In addition to Transmission System Operators (TSOs) and Distribution System Operators (DSOs), universities are also an important target group for PMS, and for them to adopt the model, at least one academic article documenting the model must exist.

The current version of PMS does not include the ability to incorporate Power Transfer Distribution Factors (PTDF) in the optimization. This is a shortcoming that should be addressed because Transmission System Operators (TSOs) in the EU have agreed that PTDF should be included in the optimization of the Day-Ahead market. Therefore, it is essential for PMS to be further developed so that the model can also handle PTDF.

Solution

Imada at the University of Southern Denmark, Danish Energy Economics, and Strategirummet will review the theory behind the existing unique solution model in PMS and describe the theory in scientific terms. They will also test the solution model against a scientifically recognized solution model (Gurobi) in order to determine the calculation accuracy and speed. The results will be documented in at least one scientific article.

Power Transfer Distribution Factors will be implemented in the mathematical solver in PMS, similar to the model used by European exchanges.

Impact

The project starts at TRL 6 and ends at TRL 7. PMS has currently been tested in teaching at the University of Southern Denmark and in connection with various courses on the electricity market. Once the project is completed, PMS will be ready for marketing to different customer groups:

• Universities, both domestic and international, offering courses on the electricity market
• Private course providers in the electricity market
• Transmission System Operators (TSOs) in various countries
• Consulting firms working with the electricity market
• Companies trading on the electricity market
• Private and public companies making investment decisions where the economy is dependent on future electricity prices