Seminar: Maintaining, restarting, mothballing and scrapping peaking power plants

Title: Maintaining, restarting, mothballing and scrapping peaking power plants: Cost estimation
Speaker: Professor Stein-Erik Fleten, Norwegian University of Science and Technology
Joint work with Erik Haugom (Inland Norway University of Applied Sciences), Alois Pichler (Chemnitz University of Technology), Carl J Ullrich (James Madison University)
Date & Time: 11am-noon, Wednesday 18 April, 2018
Location: WH417, Auckland University of Technology (map)


This paper estimates costs associated with mothballing, restarting, abandoning and maintaining peaking power plants. We develop a discrete-time dynamic programming model to explain switching and maintenance behaviour of plant managers. The constrained optimization approach to estimate crucial costs accommodates nonparametric dynamics for the expectations of the plant managers regarding future profitability. The empirical analysis is based on a database of the annually reported status of power plants to the United States Energy Information Administration (EIA) during 2001-2009. Our cost estimates imply so-called avoided cost rates which are less than the default rates used in the PJM Reliability Pricing Model capacity market, indicating that consumers may be overpaying for system reliability.

This seminar is being hosted by the School of Engineering, Computer and Mathematical Sciences at Auckland University Of Technology.

Inaugural ENR SIG Event

About 35 people attended the first meeting sponsored by the ENR SIG in Wellington, on 21 March.  The venue was provided by Victoria University of Wellington, who now occupy a much refurbished Rutherford House, where many in the sector used to work in the old MoE/ECNZ days, so it seemed a fitting venue for a presentation on modelling a decentralised electricity sector. Many thanks to Vicky Mabin and Bob Cavana and the VUW team for making it happen.

We had a pleasing mix of old and new faces, ranging from senior policy advisers to active modellers from both energy companies and Government agencies, with 20-30 signing up for the ORSNZ ENR SIG newsfeed.  It was a great opportunity for networking, both pre-seminar over coffee/tea provided by VUW, and over nibbles/drinks paid for by and Robinson Bowmaker Paul (RBP) and EGR consulting, whose support is much appreciated.

Prof Michael Ferris focussed on the application of equilibrium modelling using PATH to analyse interactions between risk averse participants in an electricity system approaching a 100% renewable target and on managing upstream / downstream interactions in hydro systems.  The audience were thoroughly engaged, and the speaker responded brilliantly to their probing questions.  Clearly, there was still much more to be said, and discussed, at the end of the presentation, but several lines of discussion were picked up in smaller meetings with Michael the next day, and we expect some productive interactions to continue.  You can download his presentation slides here.

Steve Batstone and David Reeve, of Whiteboard Energy, then presented the first part of their video series on the history of innovation in the New Zealand electricity sector. It’s a high quality production, and well worth seeing (you can watch it online here).  Although not overtly about “OR”, the series indirectly raises two very important questions.  First, why has OR been so successful in this particular sector?  And second, what is the “optimal” organisational structure for an electricity sector as it passed through various development phases?  So thank you Whiteboard for your participation.  We are now looking forward to Episode 2, which will be about the impact of central govt initiatives on the sector.

E. Grant Read.

Seminar: Optimization, equilibria, energy and risk

Title: Optimization, equilibria, energy and risk
Speaker: Michael C. Ferris, University of Wisconsin-Madison
Joint work with Andy Philpott, University of Auckland
Date & Time: 2:45-4:30pm, Wednesday 21 March, 2018
Location: RH105, Rutherford House, Level 1, 23 Lambton Quay, Wellington (Formerly ECNZ)

This will be followed by drinks and nibbles as well as a screening of Powering New Zealand  Episode 1: The Powerboard of Fame, with Stephen Batstone and David Reeve; see more details here.

RSVP: Please email [email protected] to confirm your attendance.


In the past few decades, power grids across the world have become dependent on markets that aim to efficiently match supply with demand at all times via a variety of pricing and auction mechanisms. These markets are based on models that capture interactions between producers, transmission and consumers. Energy producers typically maximize profits by optimally allocating and scheduling resources over time. A dynamic equilibrium aims to determine prices and dispatches that can be transmitted over the electricity grid to satisfy evolving consumer requirements for energy at different locations and times. Computation allows large scale practical implementations of socially optimal models to be solved as part of the market operation, and regulations can be imposed that aim to ensure competitive behaviour of market participants.

Questions remain that will be outlined in this presentation.

  • Firstly, the recent explosion in the use of renewable supply such as wind, solar and hydro has led to increased volatility in this system. We demonstrate how risk can impose significant costs on the system that are not modeled in the context of socially optimal power system markets and highlight the use of contracts to reduce or recover these costs. We also outline how battery storage can be used as an effective hedging instrument.
  • Secondly, how do we guarantee continued operation in rarely occuring situations and when failures occur and how do we price this robustness?
  • Thirdly, how do we guarantee appropriate participant behaviour? Specifically, is it possible for participants to develop strategies that move the system to operating points that are not socially optimal?
  • Fourthly, how do we ensure enough transmission (and generator) capacity in the long term, and how do we recover the costs of this enhanced infrastructure?


Michael C. Ferris is the Stephen C. Kleene Professor in Computer Science and the director of the Data Sciences Hub within the Wisconsin Institute for Discovery at the University of Wisconsin, Madison, USA. He received his PhD from the University of Cambridge, England in 1989.

Prof. Ferris’ research is concerned with algorithmic and interface development for large scale problems in mathematical  programming, including links to the GAMS and AMPL modeling languages, and general purpose software such as PATH, NLPEC and EMP. He has worked on many applications of both optimization and complementarity, including cancer treatment planning, energy modeling, economic policy, traffic and environmental engineering, video-on-demand data delivery, structural and mechanical engineering.

Prof. Ferris is a SIAM fellow, an INFORMS fellow, received the Beale-Orchard-Hays prize from the Mathematical Programming Society and is a past recipient of a NSF Presidential Young Investigator Award, and a Guggenheim Fellowship. He serves on the editorial boards of Mathematical Programming, Transactions of Mathematical Software, and Optimization Methods and Software.

This event is being hosted by the School of Management at Victoria University and is supported by ORSNZ through the ENR SIG.

EPOC Winter Workshop

The 2017 EPOC Winter Workshop will be held on Monday, September 4, at the Engineering School (20 Symonds Street) at the University of Auckland. More information will be available closer to the date.