Our fundamentals model for the GB power system goes through three steps to get to a half-hourly price.
We take the capacity of generators on the system and their forecast load factors, ranked by short-run marginal costs: we make a supply stack. Where forecast demand intersects on this supply curve, we 'clear' the auction and get a price.
We remove all storage and interconnectors from this supply stack, so this is a GB-only price, without storage.
Given the GB-only price, without storage, we then add storage back in and recalculate the price.
This is because the short-run marginal cost for storage depends on the charging cost, which changes based on the day. So, we decide when the storage fleet charges and discharges based on this GB-only price, without storage.
We then put the storage fleet back into the demand and supply stack to get a GB-only price, with storage.
Once we have a GB-only price, we add in Interconnection.
We model prices in the rest of Europe with the same logic (based on their fuel mix, forecast load factors, and forecast demand) and allow power to flow between GB and the other side of the interconnectors into each region.
Finally, we get a half-hourly price for GB with storage and interconnection.
In reality, yes. But we had to make a decision when modeling which one to do first, and we decided that interconnectors are often used closer to real-time to deal with imbalances.
Updated 9 days ago