Energy game manual

Thanks to Severin Borenstein and Jim Bushnell for developing the original "Electricity Strategy Game" that inspired and served as the original building block for this game. Thanks for the many participants in the 2013 and 2014 Stanford GSB class Energy Markets and Policy, participants to the 2013 Conference on Regional Carbon Policies, and participants in the 2014 course Best Practices in Electricity Market Design and Regulation who used earlier versions of the game and gave valuable feedback.


Overview of games

Base game scenario

This game is a basic game where each generation company places bids for the full capacity of each unit in their portfolio of power plants in a Uniform-price auction. The game is separated into a North and South market but initially there is no transmission constraint. The game contains four periods approximating the shape of demand over a day. The other games deviate from this base game in order to illustrate different properties of electricity markets.

"Pay as bid" scenario

In this game generators bid under a Pay-As-Bid auction. It illustrates the impact of auction mechanisms on market impacts.

"Congestion" scenario

This unit illuminates the effects of network congestion. This games adds a 750 MWh transmission constraint between the North and South regions to the base game.

"Forward markets" scenarios

This unit illuminates the effects of forward contracts on generator behavior. In addition to the conditions of the base game, this game gives pre-assigned non-sellable forward contracts to the generators at the beginning of the game. Unlike the base game, this game repeats the high demand conditions. The "low" variant gives the teams forward contracts that cover a lower fraction of their base capacity, the "medium" variant gives the teams forward contracts that cover a higher fraction of their base capacity similar to what they'd sell under a competitive market, and the "high" variant has the teams contracted for more than their capacity.

"Carbon tax" scenario

This unit illuminates the effects of a carbon tax on generator behavior. This game adds a carbon tax of $163 per ton. If generators bid marginal cost and demand is as expected the amount emitted should be equivalent to that in the carbon cap scenario.

"Carbon cap" scenario

This unit illuminates the effects of a carbon cap on generator behavior. This game adds a carbon cap and tradeable carbon allowances to the base game. If generators bid marginal cost and demand is as expected the amount emitted should be equivalent to that in the carbon tax scenario.

Energy game concepts

Wholesale electricity markets

  • Generating companies bid in the capacity of their units
Genco bid graphic
  • System operator generates aggregate supply curve and crosses with demand to determine which plants run
Supply/demand curve
  • Various possible markets: e.g. day-ahead, day-of, hour-ahead (multi-settlement market has more than one type)

Congestion in our game

  1. Compute market equilibrium assuming no transmission constrain
  2. Compute how much power from one region would flow to the other
  3. If figure is greater than transmission line capacity, constraint binds
  4. Compute market equilibrium again, treating North and South as separate regions

Hedging spot price risk

Hedging spot price risk

Contract is purely financial: make "difference payments"

Incentives with forward contracts

Profits  = Revenue from spot sales + "Difference payments" under contract  = [Qspot*Pspot − Cost(Qspot)] + Qcontract*(Pcontract − Pspot)  = (Qspot − Qcontract)*Pspot + Qcontract*Pcontract − Cost(Qspot)


(Qspot − Qcontract)*Pspot
Revenue from selling electricity generated in excess of contracted quantity (or cost of purchasing electricity in the spot market to make up any shortfall relative to contracted quantity)
Revenue from forward contract
Cost of generating Q. This includes variable costs of operating units and fixed O&M of all units.

Implementation of CPP-R in the game

CPP-R demand reduction
  1. Retailer declares CPP Rebate for next period
  2. Demand curve in next period is shifted in by average of 20% (std. dev. of 5%) - represents end customer response
  3. Retailer pays rebate to customers (say, $0.10/kWh)or reduction in demand relative to "expected"
  4. Retailer receives normal retail payment (say, $0.10/kWh) for realized demand

CPP-R helps retailers by substantially reducing procurement price (Pspot) if on a steep portion of the supply curve and also reduces demand in periods when Pspot > Pretail

Demand conditions for the "days" in our game

Demand conditions
  • Each period represents one "hour" of the day: 4am, 10am, 4pm, or 10pm
  • Demand is relatively (but not completely) inelastic
  • The realized demand intercept in both North and South regions is a random variable with mean equal to the forecast demand intercept and standard deviation equal to 3% of the forecast demand intercept

Base Genco portfolios

Name of the generating company that owns the plant.
Name of the power plant.
Which region the plant is located in>
How much capacity (in MWh) does the power plant have.
How much does it cost to buy the fuel needed to generate a MWh.
How much other variable "Operations and Maintenance (O&M)" costs are incurred per MWh produced.
How much fixed O&M costs are incurred per period regardless of whether the plant ran or not.
How many tons of CO2 are emmitted per MWh generated.
portfolio plant location mw fuelcost varom fixom carbon type
Big_Coal FOUR_CORNERS South 1900 17.5 1.5 2000 0.55 coal
Big_Coal ALAMITOS_7 South 250 50 1.5 0 0.59 gas
Big_Coal HUNTINGTON_BEACH_1-2 South 300 27 1.5 500 0.32 gas
Big_Coal HUNTINGTON_BEACH_5 South 150 45 1.5 500 0.53 gas
Big_Coal REDONDO_5-6 South 350 28 1.5 750 0.33 gas
Big_Coal REDONDO_7-8 South 950 28 1.5 1250 0.33 gas
Big_Gas EL_SEGUNDO_1-2 South 400 30 1.5 250 0.35 gas
Big_Gas EL_SEGUNDO_3-4 South 650 27.5 1.5 250 0.32 gas
Big_Gas LONG_BEACH South 550 36 0.5 500 0.42 gas
Big_Gas NORTH_ISLAND South 150 45 0.5 0 0.53 gas
Big_Gas ENCINA South 950 28.5 0.5 500 0.34 gas
Big_Gas KEARNY South 200 62 0.5 0 0.73 gas
Big_Gas SOUTH_BAY South 700 30 0.5 500 0.35 gas
Bay_Views MORRO_BAY_1-2 North 335 26.5 0.5 500 0.31 gas
Bay_Views MORRO_BAY_3-4 North 665 25 0.5 1000 0.29 gas
Bay_Views MOSS_LANDING_6 North 750 21.5 1.5 2000 0.25 gas
Bay_Views MOSS_LANDING_7 North 750 21.5 1.5 2000 0.25 gas
Bay_Views OAKLAND North 150 42 0.5 0 0.5 gas
Beachfront COOLWATER South 650 29 0.5 500 0.34 gas
Beachfront ETIWANDA_1-4 South 850 28.5 1.5 2000 0.34 gas
Beachfront ETIWANDA_5 South 150 42.5 1.5 250 0.5 gas
Beachfront ELLWOOD South 300 52 0.5 0 0.61 gas
Beachfront MANDALAY_1-2 South 300 26 1.5 250 0.31 gas
Beachfront MANDALAY_3 South 150 35 1.5 250 0.41 gas
Beachfront ORMOND_BEACH_1 South 700 26 0.5 1750 0.31 gas
Beachfront ORMOND_BEACH_2 South 700 26 0.5 1750 0.31 gas
East_Bay PITTSBURGH_1-4 North 650 28 0.5 625 0.33 gas
East_Bay PITTSBURGH_5-6 North 650 25 0.5 625 0.29 gas
East_Bay PITTSBURGH_7 North 700 41 0.5 1000 0.48 gas
East_Bay CONTRA_COSTA_4-5 North 150 40 0.5 250 0.47 gas
East_Bay CONTRA_COSTA_6-7 North 700 27 0.5 1500 0.32 gas
East_Bay POTRERO_HILL North 150 48 0.5 0 0.57 gas
Old_Timers BIG_CREEK South 1000 0 0 3750 0 hydro
Old_Timers MOHAVE_1 South 750 15 4.5 3750 0.47 gas
Old_Timers MOHAVE_2 South 750 15 4.5 3750 0.47 gas
Old_Timers HIGHGROVE South 150 34 0.5 0 0.4 gas
Old_Timers SAN_BERNADINO South 100 37 0.5 0 0.44 gas
Fossil_Light HUMBOLDT North 150 32.5 0.5 0 0.38 gas
Fossil_Light HELMS North 800 0 0.5 3750 0 hydro
Fossil_Light HUNTERS_POINT_1-2 North 150 33 1.5 250 0.39 gas
Fossil_Light HUNTERS_POINT_4 North 250 51.5 1.5 250 0.61 gas
Fossil_Light DIABLO_CANYON_1 North 1000 7.5 4 5000 0 nuclear