Electricity Market Game
Introduction and instructions
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Goal of the game
To learn:
• The basic functioning of an electricity market
• How to bid in a spot market
• How to make investment decisions in an
uncertain environment
 implications for the energy transition!
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Winning criterion
• The objective is to maximize the company's bank
balance by the end of the game.
• Subject to the constraint that your bank balance
always needs to be positive.
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Basic structure of the game
Demand
Company X
Fuel
Generator
Power exchange
Generator
Company Y
Z
Cash
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Main characteristics
• Players have power plants, know current energy prices
• Bid their capacity into a power exchange
• Each round is one year
• Three sub rounds: base (5000 h/y), shoulder (3500 h/y) and
peak (160 h/y)
• Power plants are run in order to produce sold electricity
• Operating profit = power exchange revenues – fuel cost
• Net profit = operating profit – capital cost – fixed O&M cost
• Demand grows, power plants age: need to invest
• New plants: construction time
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Your website
• Media: public information
• energy news
• company performances
• (dis)investments by competitors
• Power exchange
• bid form
• market results
• Balancing market
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Your website (2)
Private company data:
• Physical data:
• Power production per round
• Overview of power plants (capacity, reliability, efficiency,
remaining loan, fixed O&M costs, operational status, age,
dispatch priority)
• Forms for (dis)investing
• Financial data
• Bank account, with all costs and revenues
• Overviews of cash flow and financial history
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The power exchange – modeled on
the APX
Bron: APX.nl
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APX results this morning
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Power exchange
Company X
Generator
Generator
Company Y
Z
Demand
Spot Market
Market clearing
25
Market
Clearing
Price
(€/MWh)
20
15
15
Supply
Demand
PriceLine
10
DemandLine
5
370, 0
0
0
100
200
300
400
500
600
700
Market Clearing Volume (MW)
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How to bid
• Calculate available capacity
• correct for wind factor and power plant outages
• Check fuel prices to calculate your costs
• Bid MW not MWh!
• the capacity of your bids is multiplied by the hours of the time
period for which you bid
• If you sell more than you can produce, you will be charged
for an imbalance!
• In this case, companies with excess capacity will sell to the
balancing market
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Bid forms
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Bid periods
• In reality: bids every half hour.
• Here: three bid periods per round:
• Peak 160 hours/year
• Shoulder 3600 h/y,
• Base 5000 h/y,
 Each round represents a year
Demand growth varies, but the difference between
peak, should and base demand functions remains
the same.
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Generation portfolio
• Your generation portfolio determines
• your generation capacity available for power production
• your operating cost  bid strategy
• You need to make a spreadsheet to calculate
operating cost
• Investment decisions are also best supported by an Excel
sheet
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Power plants
• Power plants can fail
• Current plant availability is indicated
• Outages last entire year
• Reliability decreases over time
• Capital costs: 15 years from start of construction
• Operating costs (only fuel) depend on:
• fuel efficiency
• fuel prices vary
• Wind plants: output varies
• Plant value = Loan  net value of assets is zero
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Investment
• A long time period is simulated  investment is
key to success.
• Power plants are 100% debt financed. Loans are
paid off in 15 rounds.
• Other costs:
• fixed Operating and Maintenance (O&M)
• fuel cost
• Plants become less reliable as they age.
• Uneconomic plants can be dismantled
• this terminates their fixed O&M costs
• but their loans will need to be paid off.
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Bank account
• Revenues from selling electricity
• to the spot market
• to the balancing market
• Costs
• plant: loan, fixed O&M and fuel costs
• balancing market costs/revenues
• penalties from the Competition Authority (if applicable)
• See the manual for how the transactions are organised
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Playing the game
• Each round, you need to…
… analyze output from previous rounds, fuel prices, news etc.
… prepare bids for spot market
… make (dis)investment decisions
• Between rounds, time stands still
• If appropriate, we may speed up the game.
 Prepare a spreadsheet for your bids and investment
analysis
• bids can be copied from a spreadsheet into the game
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Groups
• Each game: 4 groups
• 4 players per group
• Login and access via Learn
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Time plan
• Review the instructions with your group ASAP
• First round of practice bids on Friday, then MondayWednesday (4 rounds)
• Game proper begins on Thursday 27th
• maybe also multiple rounds on specific days, depending on your
preference
• Game completed no later than Friday 2nd May
• Review upon completion via Adobe Connect Seminar
• NOTE: It’s intended to move coursework deadline to
Thurs May 15th
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Approach
• Divide tasks between group members
• bidding
• investment planning
• market analysis
• Create spreadsheet
• prepare bids: can be copied into game!
• 6 colums (peak volume & price – shoulder volume &price –
offpeak volume & price)
• calculate new plant profitability under different scenarios
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Practical issues
• After ordering plant, go to your plant overview table to
check that everything went well.
• Excel needs to work with decimal point.
• In Windows, go to Control Panel  Region and Language 
Formats tab  Additional Settings button  decimal symbol
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Hints
• We’ll simulate a full business cycle:
• Enough time to experiment with bidding
• Investment is important
• There is a mail function:
• check your mailbox!
• You can use your mission statement to position
yourself.
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