Electricity markets are today central in the way we exchange electricity. The increasing penetration of renewable energy sources in power systems has a substantial and complex impact on these electricity markets. In this context, the objective of this course is to introduce the students to the fundamental aspects of renewable energy in electricity markets, from the point of view of both market operators and market participants. En studerende, der fuldt ud har opfyldt kursets mål, vil kunne:

• Explain the fundamentals of electricity markets
• Explain various markets, actors, and pricing mechanisms
• Explain the market-clearing process from both optimization and equilibrium perspectives
• Describe the impact of renewables on electricity markets
• Develop and solve relevant optimization and equilibrium problems for electricity markets
• Design and apply decision-making problems under uncertainty for optimal offering strategy of both price-taker and price-maker actors
• Implement some of these optimization and equilibrium problems in Julia or Python
• Present, analyze, and interpret the numerical results

Introduction

Fundamentals of electricity markets
- Supply and demand curves and the merit-order principle
- Definitions of social welfare and equilibrium
- Various pricing mechanisms
- Various electricity markets
- Various market actors
- European versus US electricity markets
- The market-clearing problem as an optimization problem

Day-ahead market
- The day-ahead market in practice (focus on Nord Pool)
- The market-clearing problem as an optimization problem
- Verification of the market-clearing price using optimality conditions
- Network effects: Zonal versus nodal market clearing

Market clearing: optimization versus equilibrium
- The market-clearing problem as a competitive equilibrium problem
- Definitions of Nash equilibrium and mixed complementarity problem

Intra-day and balancing markets
- Markets in practice (focus on Nordic markets)
- The market-clearing problem as an optimization problem
- One-price versus two-price balancing settlements

Ancillary service markets
- Ancillary markets in practice (focus on European and Nordic markets, such as mFRR, aFRR, FCR, FCR-N, and FCR-D)
- The market-clearing problem as an optimization problem

Impacts of renewables in electricity markets

Offering strategy of a price-taker wind power producer
- Price-taker versus price-maker actor
- Offering strategy as a newsvendor problem
- Offering strategy under uncertainty via stochastic programming (decision making and out-of-sample verification)
- Risk considerations

Offering strategy of a price-maker actor
- Modeling strategic behavior
- Bi-level programming
- An optimization model for price-maker offering strategy - You can find lecture slides and example of programming-based assignments from last years here: https:/​/​www.jalalkazempour.com/​teaching
- The evaluation will be based on group reports for course assignments, so group management skills are necessary. Students are responsible of forming their groups. 04. maj, 2023