Fundamental Modeling of the Alberta Power Market

Abstract

In this project, we identify the primary price drivers and characterize their dynamics in an engineering-based bottom-up model. This fundamental model is based on the economic theory of supply and demand. The power price is determined by the intersection of demand with the dynamic characteristics of the generators’ supply functions. The dynamics of power prices will be represented naturally while satisfying operational constraints. In view of the uncertainty around the future values, we model independent exogenous variables such as fuel prices, outages, and load, as stochastic processes. A broad analysis of levels of aggregation and model simplification will be a comprehensive reference for future modelers. The downside of this methodology is the onerous data and input parameter requirements and burdensome computational costs.