Influence of the Renewable Energy in the Simulation of Liberalised Markets

In order to quantify the influence of renewable energy in liberalised markets, the impact of emissions in electricity generation costs is used as a variable sensitive analysis. To determine the quantity and price generation strategic bids the surplus maximisation problem with technical and economical constraints is solved in two types of market prices: Market Clearing Pay and Pay As Bid. Assuming that there is consumer´s reaction and that the market price and the demand are related, this study considered an elastic demand curve approximated by an affine function. A parameter, the conjectural variation one, defines the competitor´s reaction between the supply participants. Based on real data from several liberalised electricity markets, the price is represented by a normal probability function with boundaries. Since there is two price markets types, the MCP (Market Clearing Pay) and PAB (Pay As Bid), this study compares the market behaviour for both. Some authors argue that renewable energy shouldn´t be supported (like in Portugal by feed-in tariffs) and should go to market. The present study is made in two situations: without incorporating the externalities and taking account with the emissions, presenting quantitative answers. For illustration, a coal power plant is utilised to show the change in behaviour due to emission externality. The relevance of subject matter and originality of the present study is the market simulation with price and quantity strategic bids simultaneously. Also, the non-linear generation bids and the market price distribution with a normal function are value added by the present study.