IDEM

Irish Dispatch Electricity Model

IDEM simulates the wholesale price of electricity in the Irish All-Island Market. The All-Island Market started in November 2007 and includes Northern Ireland as well as the Republic of Ireland .

The average yearly wholesale price of electricity is determined by an optimal dispatch model. An exogenous demand curve determines the amount of electricity that is needed in each half hour of the year, based on historic demand patterns. On the supply side, the wholesale market is modeled as a mandatory pool system, with generators bidding the short run marginal cost of electricity production. Essentially, the short run marginal cost accounts for fuel costs and costs of carbon emissions if the price of CO₂ permits is positive. Plants are stacked according to their bid, from the cheapest to the most expensive, and the cheapest plants that are needed to match demand in each half hour are dispatched. The bid price of the marginal dispatched plant determines the system marginal price, and all the plants that are dispatched are remunerated at this price.

The model takes into account key features of the electricity system in Ireland . It gives details of all the plants generating electricity, their size, the type of fuel they use, their yearly availability (accounting for typical maintenance schedules) and how efficient they are at converting fuel into electricity.(The model abstracts from some more detailed engineering constraints, such as the time needed (and the costs incurred) to turn a power plant on or off and to increase or decrease output. It also does not account specifically for the provision of ancillary services, such as reserves.)  The model assumes that there are no transmission constraints within Ireland , which yields a single wholesale price of electricity within the jurisdiction. Fuel prices are exogenous and are taken from the International Energy Agency ‘Energy Prices and Taxes’ publication.

IDEM determines the average yearly price, calculated as the weighted average price of wholesale electricity, where the weights are determined by the share of yearly demand occurring in each period. It also provides information on the amount of electricity produced by each plant and how much fuel is used in the process.

Currently Ireland and Great Britain are joined by a 500MW high voltage direct current (HVDC) interconnector between Scotland and Northern Ireland that operates at 400MW. In order to determine the price of electricity at each node of the interconnector (and simulate the effect of larger amounts of interconnection) the model also calculates a system marginal price for Great Britain . The dispatch model for Great Britain is similar to the one for Ireland , albeit less detailed. Generating plants that use the same type of fuel (e.g. coal or natural gas) are aggregated into a few large plants. Malaguzzi Valeri (2008) finds that interconnection will have to be large to have a substantial effect on the market structure in Ireland, and that it is unlikely that interconnection will be financed by the private sector.

Lyons et al. (2007) use IDEM to support their argumentation for a stable and predictable system of capacity payments to stimulate investment in power generation capacity in general and peak capacity in particular.