How the information technology could change — in better — the most important energy market. Part two

Simply using the today technology instead of that of 90’s, the day-ahead energy market could be improved in financial efficiency and transparency.

The part one of this article is available here: https://medium.com/@poderico/how-the-information-technology-could-change-in-better-the-most-important-energy-market-39485913a0a6

The day-ahead energy market works through a mechanism of an implicit auction. It is based on the gathering offers to buy and sell energy, that are collected by the members of PCR consortium and used to feed an optimization algorithm called Euphemia.

After the submission, the offers remain completely unknown. Except for the GME, the Italian energy market holder, that publish with seven days of delay all the submitted offers, all the other market holders publish anonymous and aggregated forms of the offers.

Also on the solutions provided by the Euphemia algorithm, there are legitimate doubts, foremost due to the fact that nobody can the feasibility and the quality of that solutions, because the offers are hidden.

The actors of the market

Who are the actors of electricity market?

• The energy operators that buy and sell energy on wholesale markets. They are the player that submit buy and sell offers.
• The transport system operators, that provide the capacity constraints of the transportation network of their competence.
• The energy market holders, that collect the offers and publish the official results.
• The solver of the implicit auction. That is, at today with a de facto monopoly, the Euphemia algorithm.
• The energy Authorities, that provide the working rules and the guarantee on the fairness of the market.
• Research and study organizations, that use the data of the electricity markets for their own activities.

In the following, I’ll refer to the first four actors as active actors, because they act to the determination of prices and volumes.

The current schema

Into the current working schema, data have a fixed route, closed and opaque. They are all conditions that, in a given sense, mismatch with the characteristics of a liberal market in a modern sense. For instance, the operators’ competition is limited; it is not clear what are the bottlenecks; it is not clear how good are the solutions provided by Euphemia.

Regarding the last item, I’d like to remember that the mathematical model describing the implicit auction, with the current working rules of the national electricity markets, is of difficult resolution from the computational point of view.

2010’s technology

Adopting some of the technology now consolidated and secure, it could be possible to resolve so many of the so described limitations.

In the precedent article, I’ve described the re-optimization. In this article, I’d like to analyze the impact of a cloud architecture, supporting all the actors of the electricity market.

The architecture I was thinking about, to support the electricity market, is a hybrid cloud: a mix of private and public clouds. To the private portion can access only the active actors of the market, whilst the other actors can use also the public portion. In any case, any actor provides physical computers and appropriated resources that will be used to build the physical layer of the cloud. In this way, any actor contributes to the memory and to the calculus resources.

Any operator could uses their portion of the cloud as a reserved interface to access the market to:

• submit the offers
• know its the outcome (accepted or reject offers)
• know the public offers
• verify the feasibility and the fairness of market results
• improve the competition against their direct competitors.

Similarly, the transporters could use their portion of the cloud to:

• submit the active constraints of the transportation network;
• analyse the results;
• verify the impact of new transportation assets on the market results.

The PCR members, with this architecture, could lose the responsibility to collect the offers, but still could operate as guarantors of the results. Further, with their portion of the private cloud, they could be responsible for the accepted and rejected offers and for the actual prices, in all the provided case of national markets splitting.

All the above cases are examples of how to improve the transparency of the market, promoting a better competition. But there is another source of competition that could be improved using a cloud.

In fact, there could be more suppliers of optimization algorithms competing on providing optimal market solutions. Every supplier could provide some hardware to build their own portion of the private cloud. It will be used by a solution provider to:

• access to all the necessary input to run a single market day
• execute its algorithms
• submit its own solutions

In this way, more algorithm providers will provide more different solutions. A third party mechanism will be in charge to verify the feasibility of the submitted solutions and to select the one with the higher welfare. The algorithm supplier that will provide the better solution will gain a delivery token.

All the other actors, i.e. the energy Authorities and the research and study organizations, also them to access to the resources shared by the cloud will provide some hardware that will increase the calculation and memorization resources. Their private portion of the cloud will work as a private interface to access the offers and to the official results.

With an opportune ageing policy of the data and of access to the data is it possible to implement adequate schema of publishing of public data. These information could make possible the audit of the fairness and of the transparency of the markets.

Be dare

As we have seen, the application of a robust and consolidated technology — the cloud — could make possible the accomplishment of many advantages for the collectivity, through objective improvements of electricity markets.

As in my knowledge, the shown solution could be applicable to the day-ahead market and to the intraday markets.

Why do not make possible a European initiative devoted to the development of a cloud of the electric market? I really enjoy listening to your ideas and comments.