The electricity price when importing electricity is set at marginal costs of most expensive plant

[JAlsem]

the electricity price at moments that import is needed should be higher than the marginal costs of the most expensive plant. Now the most expensive plant is used that does not even have a number of units !! : the "energy_chp_ultra_supercritical_wood_pellets". This is an old plant type that can not be used in the model.

Not the marginal costs of this wood pellets CHP plant should be used for setting the electricity price at moments of import, but a number based on the TenneT unbalance market results.

[ChaelKruip]

@JAlsem please fix this price with something realistic soon. Looking at several years of Tennet data will probably give you a better idea of what maxima actually occur.

Keep in mind however that the maximum price should not be smaller than the maximum marginal cost of any participant in the ETM considering maximum fuel prices and CO2 prices! This seems to be about 1050 EUR/ MWh (for the gas turbine). If we choose a maximum price smaller than this, we can have the weird behavior that a plant will ask a price which is lower than its own marginal cost!

[JAlsem]

The maximum prices for power in the case of an immediate shortage according to the data from TenneT are: 687.19 Euro/MWh in 2009 587.40 Euro/MWh in 2010 563.83 Euro/MWh in 2011 537.41 Euro/MWh in 2012 The data shows that the maximum price is not higher than around 700 Euro/MWh and therefore does not reach the 1050 Euro/MWh.

@ChaelKruip Is the 1050Euro/MWh based on the maximum values of the sliders for fuel prices and CO2-costs? Because these maximum values might not be realistic, it can outnumber the realistic values of the TenneT data. We can then either:

• adjust the maximum values of the sliders so that the TenneT value is not exceeded,
• or accept the maximum provided by the model, manually set a value that is higher than 1050 Euro/MWh and just keep the realistic value from TenneT in mind when analysing the profitability
• or choose to set the maximum at the values from the data from TenneT and limit all possible marginal costs to this number.

I think the best option is the second one, since we don't want to overrule the merit order effect (option 3). @ChaelKruip @AlexanderWirtz @Richard-Deuchler Do you agree?

[Richard-Deuchler]

although we currently have a bit of a funny way of setting the maximum price, I do like the fact that it increases with rising fuel (and CO2) prices.

I think, we should first answer the question if the maximum price should be a static value or if it should increase according to fuel prices. What happens in reality? Is it the case that rising fuel prices allow producers to ask for higher prices? Or vice versa, producers should be less profitable in an environment of high operating cost?

[AlexanderWirtz]

For now option 2 is the least of all evils. better yet would be a check if the manually set maximum price is lower than the marginal costs of any installed plants. If so, we take that as maximum price. In this case the most expensive plant cannot make a profit, but it is only meat for extreme slider settings. Or is that a dirty fix?

[ChaelKruip]

After discussion with @dennisschoenmakers and @AlexanderWirtz the following decision has been made:

For the moment (import/export will change this) let's make the maximum price equal to 7.22 times the most expensive installed plant. The magic number of 7.22 is found by dividing the Tennet max price (600) and the marginal cost of the gas turbine (83). Therefore, the maximum price is 600 for the start scenario and robust to changes in the prices of carriers etc.