PhD defense: Pricing in Non-Convex Electricity Markets

On Wednesday 30 May 2012 Veronica Araoz Castillo will hold a trial lecture on a prescribed topic, and defend her thesis for the PhD degree at NHH.

25.05.2012 - Ed.

Deregulation of the electricity markets has brought several interesting topics to the research agenda. Switching from a monopoly based industry to the free market industry has not been straight forward. The competitive segments of the deregulated electricity markets, the wholesale market and the retail market, have evolved in different ways across the globe, and consequently there are different market designs and different pricing mechanisms.

In a competitive market, the price is given by the intersection of supply and demand. However, electricity treated as a commodity, open to the market forces, has several characteristics that do not fit into the classic economic model where prices are set by the intersection of supply and demand. This is due to non-convexities. This can be a challenge for the price discovery process, since the supply and demand curves may not intersect; or if they intersect, the price found may not be high enough to cover the total cost of production.

In the dissertation, Araoz Castillo review previous work on setting prices for the day-ahead electricity market in a power pool auction.

In addition, an alternative pricing mechanism is proposed. This mechanism employs a Semi-Lagrangian relaxation technique. This technique provides a price that can be applied in the electricity pool markets. In this type of markets a central system operator decides who produces and how much they should produce.

The proposed pricing approach not only accommodates the non-convexities that the electricity market has, but also provides a price for the day-ahead electricity. At this price, the demand is fulfilled at minimum cost and all generators are covering their fixed costs. The technique is applied to a model without networks constraint, with network constraints and also to obtain capacity prices.

Veronica Araoz Castillo (f.1978) was born in Mexico City. She graduated as an accountant from ITAM in Mexico in 1999. In 2005, she received the MSc in Management Science with honours from the University of Southampton in the UK. She has been a PhD student at the Department of Finance and Management Science, NHH.

Prescribed topic for the trial lecture:
The use of various duality theories in economic applications

Time of the trial lecture:
10:15 in Karl Borch's Auditorium, NHH

Title of the thesis:
Pricing in Non-Convex Electricity Markets

Time and place for the defense:
12:15 in Karl Borch's Auditorium, NHH

Supervisor:
Professor Kurt Jörnsten, NHH (principal supervisor)
Professor Kenneth Fjell, NHH

Evaluation committee:
Professor Stein W. Wallace, Lancaster University, Chair
Dr. ing. Nina Detlefsen, Energinet.dk
Professor Em. Thorkell Helgason, the Office of the Parliament of Iceland