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The IBS Nodal Pricing Model

In winter 2008/09, IBS has developed its power price forecasting capability to allow for transmission constraints and market power. It can now assist potential investors to assess the pricing and sales volumes they can obtain in different regions of Turkey. Its model also allows for the impact of pricing on demand.

The new IBS Nodal Pricing Model builds on IBS’s long-proven Power Pricing and Balancing Model, which IBS has been using to serve investors and finance institutions in recent years. Its new model is a Computational Nodal Pricing Model which reviews overall power pricing and demand, covering 2004–30, taking, wherever possible, 2008 actual figures as the base. It allows for different scenarios of growth in the Turkish economy, where firms can exercise market power and where consumers are price sensitive in choosing their demand. This unique model which allows for such variables as varying fuel prices, substitution fuels, losses, changes in ownership, varying load factors and financial assumptions, varying power plant commissioning dates, and varying fuel mix and growth scenarios. The model contains details of 935 actual, planned and discussed power plants. It also allows for varying carbon taxes and can run on the basis of short-run marginal costs or long-run marginal costs.

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The IBS Nodal Pricing Model is implemented in Advanced Integrated Multidimensional Modeling Software (AIMMS). In the user-friendly environment of AIMMS various modules are developed. One module can read the required data directly from the Excel-based IBS Power Pricing and Balancing Model. The current setting of the model is calibrated to 27 years (2004-2030), 16 representative hours (four seasons and four time blocks) representing seasonal differences and intra day load differences, 9 interconnected load balancing regions (nodes), which is represented by Power Transmission Distribution Factors (PTDFs), and Net Transfer Capacities (NTC) on the nodal interfaces. The Linear Programming (LP) module finds minimum prices under which the system can be balanced, under the principle of company profit optimization. Based on these prices, nodal demand and the demand elasticity, the nodal demand curves can be calibrated. The Quadratic Programming (QP) module can be used to show the impact of market power on nodal prices, using the calibrated nodal demand curves. Moreover, there are arbitrageurs in the model that trade away the possible nodal price differences that would emerge due to the exercise of market power.

The model output can be written back to Excel. This output consists of, but is not restricted to, the following variables, of which the highest level of detail is shown, while any higher level aggregation is also possible:

  • Nodal sales, per firm, per representative hour, per year.
  • Generation per unit, belonging to a firm, located in a node, per representative hour, per year.
  • Nodal prices per node, per representative hour, per year.
  • Arbitrage per node, per representative hour, per year.
  • Nodal power balance, per node, per representative hour, per year.
  • Flows through the interfaces, per representative hour, per year.
  • Shadow prices of transmission through the interfaces, per representative hour, per year.

 

For questions concerning the model, please contact Dr Wietze Lise, Project Manager: Wietze.lise@ibsresearch.com

Released February 2009