Intertemporal Considerations for Supply Offer Development in Deregulated Electricity Markets

The literature refers to several methods for developing supply offers for generators in wholesale electricity markets, all of which consider much more simplified environments than those that occur in reality. In particular, we consider the approach suggested by members of the Electric Power Optimisation Centre, which involves forecasting and updating a “market distribution function”. The market distribution function describes the probability that a section of an offer curve at any point within the likely ranges of (price, quantity) offering space will be accepted by the market. This function is then used to produce an optimal offer. The focus of this paper is the construction of offers and offering strategies that consider intertemporal linkages, particularly those that arise in hydroelectric systems or fuel-constrained thermal units. The main linkages considered here are limited water availability over time, hydro inflows, and hydro reservoir storage bounds, while start-up and shut-down costs, ramp-rate restrictions, and the behaviours of other participants in the offering process over time are considered in ongoing research. To date, the work of Philpott and Anderson produces offers for single periods only. None of the intertemporal characteristics and restrictions of the generatio