Title :
A Probabilistic Graphical Approach to Computing Electricity Price Duration Curves under Price and Quantity Competition.
Author :
Michaillat, Pascal ; Oren, Shmuel
Author_Institution :
Dept. of Ind. Eng. & Oper. Res., California Univ., Berkeley, CA
Abstract :
The electricity price duration curve (EPDC) represents the probability distribution function of the electricity price considered as a random variable. The price uncertainty comes both from the demand side and the supply side, since the load varies continuously, and not all generators may be available at all times. The production costs of electricity also fluctuate with the price of fuel. EPDCs have many application including the valuation of incremental generation assets or forward contracts on the energy produced by such assets, estimating capacity cost recovery and valuation of energy call options. Traditional approaches for calculating EPDCs were based on approximation methods such as the method of cumulants using Edgeworth expansions of multivariate probability distributions. This paper presents a new approach to compute numerically the EPDC under price and quantity competition models. This numerical method provide both exact numerical results and modeling flexibility. It is based on inference algorithms in probabilistic graphical models (PGMs) which exploit conditional independence relationships among the random variables
Keywords :
graph theory; inference mechanisms; numerical analysis; power markets; power system economics; pricing; statistical distributions; supply and demand; EPDC; electricity price duration curve; inference algorithms; numerical computation; power market; price competition models; probabilistic graphical approach; probability distribution function; production costs; quantity competition models; Approximation methods; Cost accounting; Forward contracts; Fuels; Inference algorithms; Numerical models; Probability distribution; Production; Random variables; Uncertainty;
Conference_Titel :
System Sciences, 2007. HICSS 2007. 40th Annual Hawaii International Conference on
Conference_Location :
Waikoloa, HI
Electronic_ISBN :
1530-1605
DOI :
10.1109/HICSS.2007.26