Consider an electricity market with two generator types, one with variable cost $c =20\emwh$, capacity $K =300\mw$ and a dispatch rate of $D_1$~[MW] and another with variable cost $c=50\emwh$, capacity $K=400\mw$ and a dispatch rate of $D_2$~[MW]. The demand has utility function $U(D)=8000D -5D^2$~[\euro/h] for a consumption rate of $D$~[MW].

Consider an electricity market with two generator types, one with the cost function $C_1(G_1)=c_1G_1$ with variable cost $c_1=20\emwh$, capacity $K_1=300\mw$ and a dispatch rate of $G_1$~[MW], and another with the cost function $C_2(G_2)=c_2G_2$ with variable cost $c_2=50\emwh$, capacity $K_2=400\mw$ and a dispatch rate of $G_2$~[MW]. The demand has utility function $U(D)=8000D -5D^2$~[\euro/h] for a consumption rate of $D$~[MW].

\begin{enumerate}[(a)]

\item What are the objective function and constraints required for an optimisation problem to maximise short-run social welfare in this market?

\item Write down the Karush-Kuhn-Tucker (KKT) conditions for this problem.

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@@ -158,11 +158,11 @@ Consider an electricity market with two generator types, one with variable cost

Consider the two-bus power system shown in Figure \ref{test}, where the two nodes represent two markets, each with different total demand, and one generator at each node. At node A the demand is $D_A =2000\si{\mega\watt}$, whereas at node B the demand is $D_B =1000\si{\mega\watt}$. Furthermore, there is a transmission line with a capacity denoted by $F_{AB}$. The marginal cost of production of the generators connected to buses A and B are given respectively by the following expressions:

Assume that the demand $D_*$is constant and insensitive to price, that energy is sold at its marginal cost of production and that there are no limits on the output of the generators.

Assume that the demands$D_A$and $D_B$ are constant and insensitive to price, that energy is sold at its marginal cost of production and that there are no limits on the output of the generators.

\begin{enumerate}[(a)]

\item Calculate the price of electricity at each bus, the production

Consider an electricity market with two generator types, one with variable cost $c =20\emwh$, capacity $K =300\mw$ and a dispatch rate of $D_1$~[MW] and another with variable cost $c=50\emwh$, capacity $K=400\mw$ and a dispatch rate of $D_2$~[MW]. The demand has utility function $U(D)=8000D -5D^2$~[\euro/h] for a consumption rate of $D$~[MW].

Consider an electricity market with two generator types, one with the cost function $C_1(G_1)=c_1G_1$ with variable cost $c_1=20\emwh$, capacity $K_1=300\mw$ and a dispatch rate of $G_1$~[MW], and another with the cost function $C_2(G_2)=c_2G_2$ with variable cost $c_2=50\emwh$, capacity $K_2=400\mw$ and a dispatch rate of $G_2$~[MW]. The demand has utility function $U(D)=8000D -5D^2$~[\euro/h] for a consumption rate of $D$~[MW].

\begin{enumerate}[(a)]

\begin{shaded}\item What are the objective function and constraints required for an optimisation problem to maximise short-run social welfare in this market?\end{shaded}

Primal feasibility is just the constraints above. Dual feasibility is $\bar{\m}_i,\ubar{\m}_i \geq0$ and complementary slackness is $\bar{\m}_i(D_i-K)=0$ and $\ubar{\m}_i D_i =0$ for $i=1,2$.

Primal feasibility is just the constraints above. Dual feasibility is $\bar{\m}_i,\ubar{\m}_i \geq0$ and complementary slackness is $\bar{\m}_i(G_i-K)=0$ and $\ubar{\m}_i G_i =0$ for $i=1,2$.

\begin{shaded}\item Determine the optimal rate of production of the generators and the value of all KKT multipliers. What is the interpretation of the respective KKT multipliers?\end{shaded}

The marginal utility at the full output of the generators, $K_1

+ K_2=$ 700~MW is $U'(700)=8000-10\cdot700=1000$\euro/MWh,

which is higher than the costs $c_i$, so we'll find optimal rates

$D_1^*= K_1$ and $D_2^*= K_2$ and $D^*= K_1+K_2$. This means $\l

$G_1^*= K_1$ and $G_2^*= K_2$ and $D^*= K_1+K_2$. This means $\l

= U'(K_1+K_2)=1000$\euro/MWh, which is the market price. Because

the lower constraints on the generator output are not binding, from

complementary slackness we have $\ubar{\m}_i =0$. The upper

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@@ -230,66 +230,60 @@ Consider an electricity market with two generator types, one with variable cost

Consider the two-bus power system shown in Figure \ref{twobus}, where the two nodes represent two markets, each with different total demand, and one generator at each node. At node A the demand is $D_A =2000\si{\mega\watt}$, whereas at node B the demand is $D_B =1000\si{\mega\watt}$. Furthermore, there is a transmission line with a capacity denoted by $F_{AB}$. The marginal cost of production of the generators connected to buses A and B are given respectively by the following expressions:

Assume that the demand $D_*$is constant and insensitive to price, that energy is sold at its marginal cost of production and that there are no limits on the output of the generators.

Assume that the demands$D_A$and $D_B$ are constant and insensitive to price, that energy is sold at its marginal cost of production and that there are no limits on the output of the generators.

\begin{enumerate}[(a)]

\begin{shaded}\item Calculate the price of electricity at each bus, the production

of each generator, the flow on the line, and the value of any KKT

multipliers for the following cases:\end{shaded}

Use the following nomenclature: price $\lambda_i$, generation $G^{S}_i$, flow $F$.

Use the following nomenclature: price $\lambda_{A/B}$, generation $G_{A/B}$, flow $F_{AB}$.

\begin{enumerate}[(i)]

\begin{shaded}\item The line between buses A and B is disconnected.\end{shaded}

$\l_A=80\emwh$, $\l_B=35\emwh$,

$G_{A}^S=2000$ MW, $G_B^S=1000$ MW, $F=0$

$G_{A}=2000$ MW, $G_B=1000$ MW, $F_{AB}=0$

\begin{shaded}\item The line between buses A and B is in service and has an unlimited capacity.\end{shaded}

$\l_A=53\emwh$, $\l_B=53\emwh$,

$G_{A}^S=1100\mw$, $G_B^S=1900$ MW, $F=-900\mw$

$G_{A}=1100\mw$, $G_B=1900$ MW, $F_{AB}=-900\mw$

\begin{shaded}\item The line between buses A and B is in service and has an unlimited capacity, but the maximum output of Generator B is 1500~MW.\end{shaded}

$\l_A=65\emwh$, $\l_B=65\emwh$,

$G_{A}^S=1500\mw$, $G_B^S=1500$ MW, $F=-500\mw$

$G_{A}=1500\mw$, $G_B=1500$ MW, $F_{AB}=-500\mw$

\begin{shaded}\item The line between buses A and B is in service and has an unlimited capacity, but the maximum output of Generator A is 900~MW. The output of Generator B is unlimited.\end{shaded}

$\l_A=57\emwh$, $\l_B=57\emwh$,

$G_{A}^S=900\mw$, $G_B^S=2100$ MW, $F=-1100\mw$

$G_{A}=900\mw$, $G_B=2100$ MW, $F_{AB}=-1100\mw$

\begin{shaded}\item The line between buses A and B is in service but its capacity is limited to 600~MW. The output of the generators is unlimited.\end{shaded}

$\l_A=62\emwh$, $\l_B=47\emwh$,

$G_{A}^S=1400\mw$, $G_B^S=1600$ MW, $F=-600\mw$

$G_{A}=1400\mw$, $G_B=1600$ MW, $F_{AB}=-600\mw$

\end{enumerate}

\begin{shaded}\item Calculate the generator revenues, generator profits, consumer payments and consumer net surplus for all the cases considered in the above problem. Who benefits from the line connecting these two buses?\end{shaded}

Generator revenues $R_{i}$, generator costs $C_{i}$, generator profits $P_{i}$, consumer payments $E_{i}$. Find the generator profits by substracting the costs from the revenue. Costs are given by integrating the marginal cost, i.e. $C_A =20G +0.015G^2$ and $C_B =15G +0.01G^2$. The generator at $B$ and the consumers at $A$ benefit from the line (price increases at $B$, decreases at $B$).

Generator revenues $R_{i}$, generator costs $C_{i}$, generator profits $P_{i}$, consumer payments $E_{i}$. Find the generator profits by subtracting the costs from the revenue. Costs are given by integrating the marginal cost, i.e. $C_A =20G_A+0.015G_A^2$ and $C_B =15G_B+0.01G_B^2$. The generator at $B$ and the consumers at $A$ benefit from the line (price increases at $B$, decreases at $B$).

@@ -297,9 +291,9 @@ Assume that the demand $D_*$ is constant and insensitive to price, that energy i

\begin{shaded}\item Calculate the congestion surplus for case (v). For what values of the flow on the line between buses A and B is the congestion surplus equal to zero?\end{shaded}