Market models in energy wholesale trade

The deregulated power market requires the optimisation of the power capacity to provide economic energy while preserving resources. This optimisation can be described by means of a simple cost-benefit analysis. The price of electricity is the essential factor in this analysis. In practice, however, estimating the future developments of electricity prices is quite complicated. We use complex mathematical market models to determine how electricity prices and markets could develop.

While short-term estimates are based on detailed calculations using an hourly resolution - where each hour of the day reflects the specific price of a product - estimates for the next 20 years are divided into annual intervals. This also enables the model for the long-term evaluation of the installed capacity. The "death curve" of the German power capacity is used to compare the available thermal power with the required thermal power taking into consideration that power plants will be shut down at the end of their service life. In times of diminishing supply market prices react far more sensibly. Herein rising prices are expected. The model can be used to analyse about when and under which conditions a new power plant can generate power economically.