Question

An electric power system has the following mix of generating capacity installed on its grid. Assume that each type of electricity generation is operated by a different producer. The table below shows the variable cost of generation (assume constant variable marginal cost of production), fixed cost, and capacity for each type of generation. 1. Draw the dispatch curve for this system. 2. Assume that demand is 3000 MWh and is completely price What would be the spot price in this wholesale electricity market? What is the system lambda for the system? Will the operator be able to continue to produce power in this market over time? 3. Assume that demand is 4000 MWh and is completely price What would be the spot price in this wholesale electricity market? What is the system lambda? How much electricity would be generated by each type of generation? What are the net revenues of generation at this level? 4. Assume that demand is 6,000 MWh at a price of $80. Can 6,000 MW of power be produced in the system? Suppose that demand would be reduced by 200 MWh at a price of $100 per MWh, an additional 200 MWh of demand would be reduced at a price of $120, and an additional 200 MWh of this demand would be reduced at a price of $150/MWh. What would happen to market price in this market in the short run? What would happen to generation and the dispatch curve in the long run?

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