1. Electricity Market Game Review 13ELP044&644 CREST, Loughborough University

2. 2 Bidding What was your bid strategy? variable cost (most teams) variable cost, but higher during shortages initially, included fixed costs, later switched to variable costs How did you include the CO 2 price/tax? as variable cost (depending on emission rate) not (1) How did you bid in the CO 2 market? tried to estimate willingness to pay used penalty as price cap (!)

3. 3 Investment decisions nuclear and wind (low carbon), preference for nuclear because predictable; lowest average cost nuclear, because the others invested in wind gas peak when shortage anticipated, autopilot – limited investment limited investment in response to ‘crazy’ wind capacity wind: fully renewable; low investment cost; be lowest bidder make coal marginal  push gas plants out of the market, keep own nuke & wind profitable (Zion) Invest in nuclear when prices start to rise

4. Investments (cont’d) How did the CO 2 market affect your investment decisions? invested in gas initially? carbon-free later? Nuclear or wind? Invested intuitively? Or Analytcally? 4

5. Main investment risks CO 2 prices  invest in low carbon Effect on electricity prices Investment by competitors, over/under investment? Did you try to limit risks by making price forecasts (including investments by competitors)? 5

6. 6 General lessons from the game How to bid in an Electricity Pool Market Investment risks and how to deal with them Electricity and CO 2 market operation The practical use of a bid ladder or stack, the underlying strategies and in a general way “the rules of the game”. Were low marginal costs important to earn money? What was supply vs. demand? Were any generator not running? We learned that for power companies the ideas of a government can be scary, for example the CO 2 cap reduction.

7. General lessons from the game (2) 7 Unexpected behavior of the market leads us to be short- term aware and not to plan in the long-term. We learned to observe our competitor’s behavior. We also learned to evaluate our performance after every round. Moreover we learned that investment in Renewable Energy Resources, such as wind plants, is very beneficial. (!)

8. General lessons from the game (3) Carefully look at the CO 2 market. Also, you need to spread your risk. If you have one large plant and it turns to unavailable you have a large fall down or your MW. That is not realistic on every aspect. In real life there would not be so many nuclear plants in such a small market. A key aspect is that the real money is earned if the prices are high because of a shortage. 8