A Hyperbolic Bid Stack Approach to Electricity Price Modelling

Modelling the energy price in the Australian National Electricity Market (NEM) requires features that are not well reflected in existing models. We present a semi-structural, multi-regional model wherein bidding is not required to be cost-based, renewable fuels and storage technology are structurally integrated, and network constraints are often binding in optimal dispatch. Available fuel capacity then does not necessarily sum to registered bid capacity, as-bid fuel costs do not dependably follow input fuel prices, and cross-regional interconnectedness requires modelling trade. Furthermore, modelling the NEM spot price path must admit price negativity and price spikes. Extending previous work in the literature, the present paper proposes a hyperbolic bid stack approach to price modelling under these conditions.