• Destenie Nock

"Let's Bid" : An Electricity Market Game

Updated: May 7, 2021

April 3, 2020

By Destenie Nock

This game uses secrets and competition to promote understanding of engineering economics, and energy markets. This blog contains a description of the game. The full paper describing the game and student evaluation can be found at: https://www.tandfonline.com/doi/full/10.1080/0013791X.2020.1745977

 

An academic's work pushes the boundaries of the field, while integrating this knowledge into educational practices. My research spans the energy planning sector. Specifically I look at the electricity expansion problem. Essentially this is related to what power plants should we build where, and how does the mix of power plants impact the environmental and social sustainability objectives of a region. After power plants are built the environmental sustainability is largely impacted by how the power plants are operated, and their level of participation in the wholesale market.



For example, assume you have a power system that has 20 GW of wind farms and 20 GW of natural gas power plants. Possible scenarios for power plant operation could be:

  1. There are no restrictions on how wind and natural gas plants participate in the market, and they have to compete with each other based on their cost to supply electricity. This leads wind to supply 40% of the electricity needs, and NG to supply 60% of the energy needs.

  2. Worried about reliability the power system operator runs the NG plant 75% of the time, and only allows wind to supply a max of 25% of the energy needs.

  3. Worried about climate change the power system operator lets wind participate in the electricity market whenever it wants. This leads wind to supply 50% of the electricity needs, and NG only supplies 50% of the energy needs.

So even though wind and natural gas plants have equal capacity, the way they participate in the market changes their energy contribution. To help students understand how the electricity market works in practice I created an electricity market game called "Let's Bid!" In this secretive competition game each student team is a different power plant, and they have to compete to make the most profit in a 24 hour period. The game takes approximately 40 - 60 minutes depending on the amount of rounds you play.


The full paper was published in The Engineering Economist. I am super happy to see this engineering education paper published. I have posted some of the paper highlights, and description of the game below for those who cannot afford or do not have institutional access to the full paper.


The paper referenced in this blog post is:

Nock, Destenie. “ ‘Let’s Bid!’ - A modular activity to promote interest in engineering economy.” (2020).The Engineering Economist. DOI: 10.1080/0013791X.2020.1745977

https://www.tandfonline.com/doi/full/10.1080/0013791X.2020.1745977


Game background and Highlights:

This paper fills a gap in active learning strategies by introducing a modular activity which can be used to introduce a wide range of theoretical concepts in a short amount of classroom time. It addresses the need for rapid instruction and engagement with students by introducing an innovative teaching method and assessment which can be used as a part of regular classroom instruction, or as a part of a one-time outreach activity. Using the electricity game provides the opportunity for iterative group-based learning which has been shown to increase social dialogue, boost student confidence, and provide the instructor with ongoing formative assessment feedback.


Nock promoting STEM activites.

The modular lesson was a combination of mini-lectures and a competitive game, called “Let’s Bid.” In the game each team is a different power plant competing to supply electricity to a regional system operator, while generating a profit. The winning team is determined by who was able to generate the most profit over a 24-hour time period.


At the start of the activity the teams are each handed a power plant card which details the type of power plant, the maximum available electricity, and supply costs at different times of the day. The first couple of slides, depending on time constraints, cover background information for the power system, the electricity market, and how electricity prices are determined. Then we go over the rules of the game are explained. The set-up and the rules of the game are presented to the teams as follows:


The situation: You have been given a power plant card (example in Figure 1) which tells you the type of electricity supplier you are. You can only supply up to the maximum available capacity (as seen on your power plant card), but you can offer to supply an amount below this number. You have on your power plant card the cost to supply electricity from your power plant.


Figure 1: Example generation supply cards. Other generators included solar, oil, and hydro.

In the example of supply cards we present wind natural gas. Other generators include solar, oil, and hydro. Note that supply costs are not based on actual values.


Rules:

  1. Don’t tell anyone your bid ahead of time

  2. Your bid is the amount of electricity you are willing to sell (in MW) at a unit price (example bid could be 300 MW at $23 per MW)

  3. Any unused available capacity does not roll over to the next time period. (i.e. You could supply 200 MW in round 1, but you only supply 50 MW. The 150 MW you did not supply is lost and you cannot supply that in the next round.)


Goal: Make the most profit in one day (24 hour time period) for your power company. Profit = (Electricity Clearing Price – Supply Cost) * (Amount of Electricity You Supplied in MW)


After the game is explained the teams are asked to submit an anonymous bid using scratch paper, which details the amount of electricity they are willing to supply at a certain unit cost. Bids are collected and written on the board and the clearing price for that round is selected by starting at the lowest unit cost and working our way up until the electricity demand is satisfied. An example of this calculation can be seen in Figure 2. It is stated that there is a demand of 800 MW. Power Plants 1 – 5 have written different offers and unit prices. First Power Plant 1 is selected to supply 150 MW because it offered the lowest unit cost at 1 $/MW. Following this Power Plant 2 is scheduled to supply 400 MW because it has the next lowest unit cost at $2/MW. The next lowest cost is presented by Power Plant 4 at $5/MW. After Power Plant 4 is scheduled to deliver 250 MW of electricity the total amount scheduled to supply is 800 MW, meaning that all of the electricity demand will be satisfied by Power Plants 1, 2 and 4. Since Power Plant 4 was the last supplier scheduled to provide electricity this supplier sets the clearing price at 5 $/MW, and all of the power plants scheduled to supply electricity at in this round will receive that price, as shown in Figure 2. The key here is that regardless of the price at which each power plant offered to supply electricity, they will receive the same payment for providing electricity, which is set by the last power plant selected to supply electricity (i.e. the marginal power plant).



Figure 2: Clearing price calculation example

Between each round of the game a mini-lesson is presented to provide more information about electricity markets and power plant investment strategies. The goal of these mini-lessons is to promote discussion about what the teams are experiencing in the game and what happens in reality.


The full Power Point can be found in the supplemental material of the paper.


The paper referenced in this blog post is:

Nock, Destenie. “ ‘Let’s Bid!’ - A modular activity to promote interest in engineering economy.” (2020).The Engineering Economist. DOI: 10.1080/0013791X.2020.1745977

https://www.tandfonline.com/doi/full/10.1080/0013791X.2020.1745977


An additional resource that might help with understanding electricity generation by states in the US can be found here. One resource about deregulation in the US can be found here.


Other electricity game can be found at this website.


Note about the author: Dr. Destenie Nock leads the Energy, Equity, and Sustainability Group at Carnegie Mellon. Currently she is a Presidential Post-Doctoal Fellow in the Engineering & Public Policy (EPP) Department and and Adjunct Professor in Civil & Environmental Engineering (CEE) at Carnegie Mellon University. In 2020 this will transfer to a tenure-track Assistant Professor position in EPP and CEE at Carnegie Mellon. She holds holds a PhD in Industrial Engineering and Operations Research from the University of Massachusetts Amherst. She earned a MSc in Leadership for Sustainable Development at Queen's University of Belfast, and two BS degrees in Electrical Engineering and Applied Math at North Carolina A&T State University. She is the creator of the PhD-ing It Blog site which posts articles about graduate and undergraduate advice, and research updates in energy and sustainability. In her free time she enjoys hitting the gym, painting, and cooking with friends. Thanks for reading. To keep up to date on blog posts, subscribe below, or follow me on Twitter @DestenieNock.




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