A company called Borduria Energy owns a nuclear power plant and a gas-fired powe
ID: 2248367 • Letter: A
Question
A company called Borduria Energy owns a nuclear power plant and a gas-fired power plant. Its trading division has entered into the following contracts for 25 January:
T-1. A forward contract for the sale of 50 MW at a price of 21.00 $/MWh. This contract aplies to all hours.
T-2. A long-term contract for the sale of 300 MW during off-peak hours at a price of 14.00 $/MWh
T-3. A long-term contract for the sale of 350 MW at 20 $/MWh during peak hours.
In addition, for the trading period from 2:00 to 3:00 PM on that day, it has entered into the following transactions:
T-4. A future contract for the purchase of 600 MWh at 20.00 $/MWh
T-5 A future contract for the sale of 100 MWh at 22.00 $/MWh
T-6 A put option for 250 MWh at an exercise price of 23.50 $/MWh
T-7 A call option for 200 MWh at an exercise price of 22.50 $/MWh
T-8 A put option for 100 MWh at an exercise price of 18.75 $/MWh
T-9 A bid in the spot market to produce 50 MW using its gas-fired plant at 19.00 $/MWh
T-10 A bid in the spot market to produce 100 MW using its gas-fired plant at 22.00 $/MWh
The option fee for all call and put options is $2.00/MWh. The peak hours are defined as being the hours between 8:00 AM and 8:00 PM.
Borduria Energy also sells electrical energy directly to small consumers through its retail division. Residential consumers pay a tariff of 25.50 $/MWh and commercial consumers pay a tariff of 25.00 $/MWh. Borduria Energy does not sell electricity to industrial consumers.
The following graph shows the stack of bids that the spot market operator has received for the trading period from 2:00 to 3:00 PM on 25 January.
In order to balance load and generation, it accepted bids for 225 MW in increasing order of price for that hour. The spot price was set at the price of the last accepted bid.
During that hour, the residential customers served by Borduria Energy consumed 300 MW, while its commercial customers consumed 200 MW. The nuclear power plant produced 400 MWh at an average cost of 16.00 $/MWh. Its gas-fired plant produced 200 MWh at an average cost of 18.00 $/MWh. All imbalances are settled at the spot market price.
a) Calculate the profit or loss made by Borduria Energy during that hour.
b) Calculate the effect that the suddent outage of the nuclear generating plant at 2:00 PM on 25 January would have on the profit (or loss) of Borduria Energy for that hour.
28 27 26 25 24 23 22 21 20 19 18 TH 17 50 100 150 200 250 300 350 400 450 500 550 600 650 700 MW) Figure 3.3 Stack of bids for Problem 3.6Explanation / Answer
Answer a) since the market operator accepted 175 megawatt of bids, using the supply curve, we determined that the spot market price was 21.00 $/MWh.
Energy bought
(MWh)
Energy sold
(MWh)
Answer b)
Borduria Energy's deficit for that period would increase would increase form 100MW to 500 MW . The spot price would increase from 21.00 to 28.00 $/MW. The cost of spot purchase would increase from $ 2000 to 14000 but the cost of operation the nuclear power plant would drop to zero. Borduria Energy incur a loss of $ 975.00
ItemEnergy bought
(MWh)
Energy sold
(MWh)
Price($) Expenses($) Revenue($) Future T4 600 20.00 12000.00 Nuclear unit 400 16.00 6400.00 Gas fired unit 200 18.00 3600.00 Forward T1 50 21.00 1050.00 Long term T3 350 20.00 7000.00 Forward T5 100 22.00 2200.00 Exercise put option T6 250 23.00 5875.00 Spot sale T9 50 21.00 1050.00 Residential customer 300 25.00 7650.00 Commercial customer 200 25.00 5000.00 Balancing spot purchase 100 21.00 2100 Fee option T6 2.00 500.00 Fee option T7 2.00 400.00 Fee option T8 2.00 200.00 Profit 4625.00 Balance 1300 1300 2825.00 29825.00Related Questions
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