Least-squares polynomial approximation for short-term generation unit asset valuation

In short-term generation unit asset valuation, a decision whether to turn the unit ldquoonrdquo or ldquooffrdquo is relied upon the present realization of electricity and fuel prices. When the electricity and fuel prices are on an indifference locus (IL), the decision made will not effecting the expected profit. Therefore, the identification of ILs is crucial step in unit asset valuation method. A novel least-squares polynomial-based technique to approximate the continuous path of ILs is developed and implemented. By using this technique, the unit asset valuation problem can be solved faster than the standard method without compromising its accuracy. Testing and model verification are performed on actual data of the PJM power market. The results indicate that the proposed technique is effective and efficient while producing significantly accurate results. It reduces the computational burden by more than 245 times and 0.90% error for 2000 simulation times.