A Review of Simulation Usage in the New Zealand Electricity Market

In this chapter, we outline and review the application of simulation on the generation offer and consumption bids for the New Zealand electricity market (NZEM). We start by describing the operation of the NZEM with a particular focus on how electricity prices are calculated for each time period. The complexity of this mechanism, in conjunction with uncertainty surrounding factors such as consumption levels, motivates the use of simulation. We will then discuss simulation-optimization methods for optimal offer strategies of a generator, for a particular time period, in the NZEM. We conclude by extending our ideas and techniques to consumption bids and interruptible load reserve offers for major consumers of electricity including large manufacturers such as the steel mill.