Electrical Engineering EE 722, Spring 2023

IIT Bombay, Powai Assignment-2

Mumbai-400076 Total Points = 50
Maharashtra, India Due: February 22, 2023

1. (Total = 4 points) A market operator receives the sell bids in the form: SBi (qi ) = βi + γi ∗ qi
where SBi (qi ) is the asking price for selling qi MW in $. The seller also submits a q̄i which is
the maximum MW he can sell. The sell bid information for an hour k is given below:

Index i βi in $/MWh γi in $2 /M W h q̄i in MW

1 3.5 0.002 1000
2 5 0.005 800
3 4.5 0.003 900
4 3.8 0.004 850
5 3.8 0.004 850

If the price discovered is 6 $/MWh, answer the following:

(a) (1 point) State true or false: Seller 1 is selling 1000 MW.
(b) (2 points) How much MW is the market clearing volume?

2. (Total = 2 points) The purchase bid received of buyer i is P Bi (qi ) = αi − δi ∗ qi where P Bi (qi )
is the maximum price he is willing to pay in $ to buy qi MW. The buyer also submits a q̄i
which is the maximum MW he can buy. If the buyer is asked to purchase 800 MW for when
the buying price is 8 $/MWh, is he satisfied with the market outcome? State yes or no and
provide a short justification for your answer.

index i αi δi q̄i
1 20 0.015 1000
2 21 0.018 1000

3. (Total = 4 points) What are the options available for electricity trading in India? Read reports
from CEA/MOP/POSOCO and find out the volume of trading through each of these options
over the past few years. Cite your sources.

4. (Total = 3 points) The incremental costs δCi/δP i for generators i = 1,2,3 are plotted below
with the labeled points indicating the incremental costs at the limits. Suppose the dispatch
problem is solved with the Lambda iteration algorithm.
 If the final λ is 7 $/MWh, then
(a) (1 point) How much MW is the power output for generator 2 is MW?
(b) (2 points) How much MW is the total demand served?

5. (Total = 12 points) Adapted from Kirschen and Strbac, problem 3.3

The following six companies participate, along with others, in the Southern Antarctica electrical
energy market:

• Red: A generating company owning a portfolio of plants with a maximum capacity of 1000
MW.
• Green: Another generating company with a portfolio of plants with a maximum capacity
of 800 MW.
• Blue: A retailer of electrical energy.
• Yellow: Another retailer of electrical energy.
• Magenta: A trading company with no generating assets and no demand.
• Purple: Another trading company with no physical assets.

The following information pertains to the operation of this market for Monday 29 February
2016 between 1 : 00 and 2 : 00 P.M.
Load forecasts
Blue and Yellow forecast that their customers will consume 1200 MW and 900 MW respectively
during that hour.
Long-term contracts
June 2015: Red signs a contract for the supply of 600 MW at 15 $/MWh for all hours between
1 January 2015 and 31 December 2020
July 2015: Blue signs a contract for the purchase of 700 MW for all hours between 1 February
2016 and 31 December 2016. The price is set at 12 $/MWh for off-peak hours and at 15.50
$/MWh for peak hours.
August 2015: Green signs a contract for the supply of 500 MW at 16 $/MWh for peak hours
in February 2016.

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September 2015: Yellow signs a contract for the purchase of electrical energy. The contract
specifies a profile of daily and weekly volumes and a profile for daily and weekly prices. In
particular, on weekdays between 1 : 00 and 2 : 00 P.M., the volume purchased is 550 MW at
16.25 $/MWh.
Futures contracts
All contracts are for delivery on 29 February 2016 between 1 : 00 and 2 : 00 P.M.

Options contracts
In November 2015, Red bought a put option for 200 MWh at 14.75 $/MWh. The option fee
was $50.
In December 2015, Yellow bought a call option for 100 MWh at 15.50 $/MWh. The option fee
was $25.

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 Outcome
• The spot price on the Southern Antarctica electricity market was set at 15.75 $/MWh for
29 February 2016 between 1 : 00 and 2 : 00 P.M.
• Owing to the difficulties at one of its major plants, Red was able to generate only 800
MW. Its average cost of production was 14.00 $/MWh.
• Green generated 770 MW at an average cost of 14.25 $/MWh.
• Blue’s demand turned out to be 1250 MW. Its average retail price was 16.50 $/MWh.
• Yellow’s demand turned out to be 850 MW. Its average retail price was 16.40 $/MWh.
Assuming that all imbalances are settled at the spot market price, calculate the profit or loss
made by each of these participants.
6. (Total = 7 points) Adapted from Kirschen and Strbac, problem 3.4
The operator of a centralized market for electrical energy has received the bids shown in the
table below for the supply of electrical energy during a given period.

(a) (1 point) Build the supply curve.

(b) (3 points) Assume that this market operates unilaterally, that is, that the demand does
not bid and is represented by a forecast. Calculate the market price, the quantity produced
by each company and the revenue of each company for each of the following loads: 400
MW, 600 MW, 875 MW.
(c) (2 points) Suppose that instead of being treated as constant, the load is represented by its
inverse demand curve, which is assumed to have the following form:
D =L−4∗π
where D is the demand, L is the forecasted load and π is the price. Calculate the effect
that this price sensitivity of demand has on the market price and the quantity traded.

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7. (Total = 7 points) Adapted from Kirschen and Strbac, problem 3.5
The Syldavian Power and Light Company owns one generating plant and serves some load. It
has been actively trading in the electricity market and has established the following position
for 11 June between 10 : 00 and 11 : 00 A.M.:
• Long-term contract for the purchase of 600 MW during peak hours at a price of 20.00
$/MWh
• Long-term contract for the purchase of 400 MW during off-peak hours at a price of 16.00
$/MWh
• Long-term contract with a major industrial user for the sale of 50 MW at a flat rate of
19.00 $/MWh
• The remaining customers purchase their electricity at a tariff of 21.75 $/MWh
• Future contract for the sale of 200 MWh at 21.00 $/MWh
• Future contract for the purchase of 100 MWh at 22.00 $/MWh
• Call option for 150 MWh at an exercise price of 20.50 $/MWh
• Put option for 200 MWh at an exercise price of 23.50 $/MWh
• Call option for 300 MWh at an exercise price of 24.00 $/MWh
The option fee for all the options is 1.00 $/MWh. The peak hours are defined as being the
hours between 8 : 00 A.M. and 8 : 00 P.M.
The outcome for 11 June between 10 : 00 and 11 : 00 is as follows:
• The spot price is set at 21.50 $/MWh.
• The total load of the Syldavian Power and Light Company is 1200 MW, including the
large industrial customer.
• The power plant produces 300 MWh at an average cost of 21.25 $/MWh.
(a) (3 points) Assuming that all imbalances are settled at the spot market price, calculate the
profit or loss made by the company during that hour.
(b) (4 points) What value of the spot market would reduce the profit or loss of the company
to zero? Would this change in spot price affect any of the option contracts?
8. (Total = 4 points) Adapted from Kirschen and Strbac, problem 4.1
Cheapo Electrons is an electricity retailer. The table below shows the load that it forecast its
consumers would use over a 6-h period. Cheapo Electrons purchased in the forward market and
the power exchange exactly enough energy to cover this forecast. The table shows the average
price that it paid for this energy for each hour. As one might expect, the actual consumption of
its customers did not exactly match the load forecast and it had to purchase or sell the difference
on the spot market at the prices indicated. Assuming that Cheapo Electrons sells energy to its
customers at a flat rate of 24.00 $/MWh, calculate the profit or loss that it made during this
6-h period. What would be the rate that it should have charged its customers to break even?

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 9. (Total = 4 points) Adapted from Kirschen and Strbac, problem 4.7
Borduria Generation owns three generating units that have the following cost functions:

Borduria Generation had the opportunity to buy some of this energy on the spot market at
a price of 8.20 $/MWh. How should these units be dispatched if Borduria Generation must
supply a load of 350 MW at minimum cost?

10. (Total = 3 points) Adapted from Kirschen and Strbac, problem 6.1
Consider the power system shown in the Figure below. Assuming that the only limitations
imposed by the network are imposed by the thermal capacity of the transmission lines and
that the reactive power flows are negligible, check that the following sets of transactions are
simultaneously feasible.

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