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Summary
This page describes the optimisation process and how Trader Parameters are used to allocate MW volume to Pricebands within each bid.
Optimisation Process
The core optimisation process does not distinguish between energy and the eight FCAS however the Bid Formulation process for Energy is quite different compared with FCAS.
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The Solver also produces a “Break Even RRP (BERRP)” for both OV and NOV (greater than 0) which approximates the price at which the dispatch of the service is marginal. The BERRP is used to allocate volume to PriceBands (PB) in a bid. Note that the BERRP is a first order approximation and is not a shadow price of the solver.
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Trader Parameters
Trader Parameters help determine where MW volume is to be allocated in a bid. There are four trader parameters for each FCAS;
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Learn how to edit a Trader Parameter in Trader Parameter Page |
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FCAS Bid Formulation
The diagramme below, Derivation of inputs for FCAS bid formulation, shows how the user inputs of Bid MaxAvail Volume (MAV) and Trader Limit Volume (TLV) are processed.
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However FRRPs differ from actual price outcomes and therefore allocating OV, NOV and NDV is important since it can impact actual revenue and can also impact longer term market dynamics. Therefore volume allocation rules must be defined to formulate a bid. A simple example of an allocation rule is to allocate OV to PB1 and NOV to PB10. This allocation rule could be thought of as a pricetaker strategy where you are indifferent to variations in actual prices compared to forecast prices. The goal of this strategy would be to ensure you are enabled the volumes that the solver determined to be optimal - irrespective of the actual price outcomes.
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FCAS volume allocation process
The workflow below, FCAS Volume Allocation, shows the inputs and the logic to allocate each of these three volumes to a bid. The workflow also shows an additional three optional inputs to the bid formulation called Trader Prices (TP1, TP2 and TP3).
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These allocation rules can be explored in pdBidr via the Bid Allocation (demo). You may enter any values and see how the Output (allocated volume) is determined. Note that you must insert a value for BERRPOV < FRRP and FRRP < BERRPNOV |
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Optimal Volume (OV) Allocation
OV is allocated in PBs between the BERRP and the maximum of FRRP and TP1. (Note that by definition BERRPOV < FRRP when OV > 0.)
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If you wish for TP1 to be ignored then set TP1 to zero. |
Non Optimal Volume (NOV) Allocation
NOV is allocated in PBs between the max(FRRP, BERRP) and TP1.
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If there are still no PBs then allocate NOV to PB10.
Non Discretionary Volume (NDV) Allocation
Under normal market conditions NDV is volume that is not intended to be dispatched. The main reason for this is to avoid oversupplying the market. However if demand, and therefore price, is high enough then it is worthwhile providing additional volume. A “high enough price” is defined as Trader Price 2 (TP2).
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Aggregate of Volume Allocation
The three sets of allocated volume (OV, NOV and NDV) are then aggregated into a single bid. This is the final optimised bid ready to be submitted.
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Energy bid formulation limits
Unlike FCAS bids, Spot Traders will continue to manually submit energy bids to optimise the value of your energy portfolio. The last manually submitted bid is termed the reference bid. Under certain conditions the Solver may adjust volume within the reference bid by a limited amount. This amount is called the Trader delta Limit Volume, TdelLV. The following definitions and constraints apply to the calculation:
An amount of volume up to TdelLV may be repriced in the reference bid.
The current expected energy target is termed Current Volume (CV) and is defined from the reference bid as the sum of PB(1,n) where PBn <= FRRP and is limited to the value of the bid maxavail.
The DV will have a minimum and maximum value, minDV and maxDV.
The Solver will apply the energy constraints, minDV <= OV <= maxDV and solve for OV. OV minus CV is defined as the delta Optimal Volume (delOV).
The Solver may only reprice delOV to lower PBs for the purpose of increasing lower FCAS enablement.
The Solver may only reprice delOV to higher PBs for the purpose of increasing raise FCAS enablement.
Repricing Energy for Lower FCAS optimisation
The Lower FCAS Availability diagramme shows the circumstance where the limit in point 5 above applies.
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delOV is moved from the first PB where sufficient volume is available. I.e. from PBx, PBx+1,…etc. to PBy, where PBx => FRRP and PBy < min(FRRP, BERRP).
Repricing Energy for Raise FCAS optimisation
The Raise FCAS Availability diagramme shows the circumstance where the limit in point 6 above applies.
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delOV is moved from the first PB where sufficient volume is available. I.e. from PBx, PBx-1,…etc. to PBy, where PBx <= FRRP and PBy > max(FRRP, BERRP).
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Energy DV Calculations and Volume Allocation Workflow
The workflow below shows the inputs, calculations and conditions used to derive the minDV and maxDV.
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Note that when MaxLowBP < CV < MinHighBP then minDV = CV = maxDV. In other words the Solver is prevented from repricing energy volume because increasing or decreasing energy volume will not increase the potential enablement of either raise or lower FCAS.
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Energy bid formulation process
The workflow below shows the outputs of the Solver where energy is repriced depending on whether delOV is positive or negative.
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Note that volume is taken from the first PB(s) that meets the condition of PBx >= FRRP if delOV > 0 (or conversely volume is taken from the first PB(s) that meets the condition PBx <= FRRP if delOV < 0) .
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Glossary
Term | Acronym | |
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BreakEvenRRP | BERRP | a calculated RRP where the service is marginal based on FRRP of other services. Note that the BERRP may be greater or less than FRRP. |
CurrentVolume | CV | is the expected energy target based on the reference bid and FRRP. This is required since Energy optimisation is limited by the reference bid. |
DiscretionaryVolume | DV | = Min(MAV, LV) for each FCAS This variable is an input into the Solver |
ForecastRRP | FRRP | is the forecast RRP of the service. Initially this will be the latest p5min forecast. |
Max Avail Volume | MAV | is the maxavail as bid for each FCAS. Note that the word Volume has been appended to the definition for consistency with other volume definitions. |
Maximum Discretionary Volume | maxDV | is the maximum energy volume that the Solver may determine as optimal. |
Minimum Discretionary Volume | minDV | is the minimum energy volume that the Solver may determine as optimal. |
NonDiscretionaryVolume | NDV | = MAV - DV Note that this variable is not an input into the Solver. |
NonOptimalVolume | NOV | = DV - OV |
OptimalVolume | OV | is an output of the Solver and is the optimal volume of each FCAS to be dispatched. |
ReferenceBid | the last manual energy bid submitted to AEMO for a given day. | |
Trader Delta Limit Volume | TdelLV | is a user inserted value that limits the volume that may be repriced from an energy reference bid. |
Trader Limit Volume | TLV | is a user inserted value that aims to limit the Discretionary Volume consumed by the Solver for each FCAS. |
TraderPrice1 | TP1 | is an optional user inserted value that limits the minimum price of a Priceband when applied to the allocation of OV. |
TraderPrice2 | TP2 | is an optional user inserted value that limits the minimum price of a Priceband when applied to the allocation of NDV. |
TraderPrice3 | TP3 | is an optional user inserted value that limits the maximum price when applied to allocation of NDV. Generally this is used to avoid allocating volume to PB10. |
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Setting Priceband values
Currently the sophistication of the algorithms is far from being able to suggest optimal priceband values. Traders will continue to select priceband values however benchmarking is expected to provide some guidance.
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Plant Costs
Initially a single value will be used for fuel cost, that is to say the input into the algorithm will be a constant.
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