TITLE:  Competitive Electricity Markets with Risk-averse Agents

ABSTRACT:

Markets for wholesale electricity supply are now ubiquitous throughout the industrialized world. In the simplest form of these markets, a perfectly competitive partial equilibrium corresponds to the optimal solution to a convex economic dispatch problem, where Lagrange multipliers yield nodal energy prices. This construction can be extended to the setting where the dispatch problem becomes a convex stochastic program (for example to deal with intermittent renewable energy, or uncertain hydro-reservoir inflows) and agents maximize expected profits. When agents are risk averse, competitive partial equilibrium corresponds to a risk-adjusted social optimum as long as derivative instruments enable agents to trade risk. We illustrate these ideas using some simple examples drawn from the New Zealand electricity market.

Bio:  Dr. Andy Philpott is a Professor at University of Auckland, and he is the director of the Electric Power Optimization Centre. He received his PhD and MPhil from University of Cambridge, and his BSc and BA degrees from Victoria University of Wellington. His research interests span most of mathematical programming, in particular linear, non-linear and stochastic programming and their application to operations research problems, in particular optimal planning under uncertainty, capacity expansion in telecommunications and power networks, optimal power generation hydro-electric power systems, stochastic optimization in supply chains, and optimal yacht routing under uncertainty. Much of his recent research has been conducted as part of the Electric Power Optimization Centre, which develops optimization and equilibrium models of electricity markets.