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Energy markets

Trading renewables, and designing markets for an uncertain, renewable-based power system

Electricity markets were designed for controllable power plants. With large shares of wind and solar power, both how producers trade and how markets are organised need to account for uncertainty.

My work on energy markets follows two threads. The first is how renewable energy producers and other participants should trade, using probabilistic forecasts and decision-making under uncertainty. The second is how markets themselves should be designed and cleared, from stochastic market-clearing and coordination between electricity, gas and heat markets, to peer-to-peer and community-based markets.

Trading wind energy with probabilistic forecasts

A wind farm must commit to its production a day ahead, before knowing the weather. Any deviation is settled in the balancing market, usually at a penalty. If falling short is penalised more than producing too much, the best offer is below the expected production, and the other way round. With a probabilistic forecast, the optimal offer is a specific quantile of the predictive distribution, set by the ratio of the two penalties. This is the classic newsvendor problem, and the insight behind our 2007 paper on trading wind generation.

Day-ahead price set at €50/MWh. The predictive distribution is bounded by zero and the 100 MW capacity of the wind farm. Making the penalties asymmetric, or the forecast more uncertain, moves the optimal offer away from the point forecast and increases what is gained by using the full distribution.

Main contributions

Trading strategies. Offering strategies for renewable producers based on probabilistic forecasts, extended to price-maker producers, wind-storage systems, energy and reserve markets, online decision-making and distributionally robust strategies.

Market design and clearing. Stochastic market-clearing that dispatches renewables while accounting for their uncertainty, with attention to revenue adequacy and cost recovery, as well as new market products and conic market formulations.

Coordination between markets. Integrated and coordinated markets for electricity, natural gas and heat, and coordination across regions and between transmission and distribution levels.

Consumer-centric markets. Peer-to-peer and community-based electricity markets, including the design of energy collectives, product differentiation, and fair allocation of grid costs.

Key papers

All market papers