Appendix A

Appendix A - PROPHET MARKET SIMULATION TOOL

PROPHET, commercially available software, is an advanced software application developed by IES which is a full and comprehensive market simulation platform that can simulate the operation of electricity markets and competitive electricity market behaviour. The application tool can be used to model various complex scenarios and detailed market simulations and is used by a variety of stakeholders such as market operators, generators, network companies and trading desks. It has been under continual development for over 20 years including development priorities arising from customer requirements.

PROPHET has been designed to be generic in many aspects and can be adapted to any market that has a spot market based on generators making offers and a market clearing mechanism that can be reasonably approximated by a linear programming model. As such, it is capable of simulating various electricity markets with different arrangements, such as the NEM’s gross pool and co-optimized energy and ancillary services markets. Other arrangements include but are not limited to:

z Nodal or zonal pricing, transmission constraints (dynamically determined based on power system conditions if required) and losses;

z Simulation of full security-constrained dispatch optimization;

z Simulation of ancillary service markets;

z Modelling transmission networks including AC lines, HVDC links and also the associated power importer/exporter arrangements.

A.1 PROPHET MODELLING FLOWS

Figure 38 provides a summary of the two main PROPHET modules, its inputs, modelling flows and example outputs:

z [Planning]: This is designed to solve intertemporal constraints and decisions including, but not limited to, new entrant capacity, optimal dispatch for an energy limited plant such as reservoir-based hydro, and carbon prices for emissions limits. This information is fed into the simulation module for detailed market simulations.

z [Simulation]: This replicates the various dispatch engines of competitive electricity markets around the world (under different market structures and arrangements) on a least-cost basis respecting physical and operating constraints and any network constraints applied. In addition, the simulation module is capable of simulating competitive generator behaviours such as portfolio bidding, market power gaming and bidding based on contracted positions.

Figure 38. Prophet Market Simulation Tool Modelling Flows

Other key features of the PROPHET modelling algorithm include:

z Modelling of physical network and generation supply, from transmission network information to generator operating constraints, hydro reservoirs, intermittent generation (renewable energy) and costs associated with production and constraints: PROPHET can also be used to model both energy and ancillary services markets;

z Optimized dispatch based on generator price and volume offers (which can be dynamic) and the ability to model market behaviour as influenced by the number of independent generator portfolios and bilateral contract positions (various forms of contracts from PPA’s, vesting contracts, swaps, caps, etc.);

z Detailed hydro reservoir systems including cascading networks and all relevant parameters such as hydro turbine efficiencies, potential energy as a function of storage height, inflow patterns, waterways, pumping and multiple reservoir/storage connections;

z The ability to set up electricity markets with different rules to understand how they perform and potential shifts in generation behaviour: calculation of prices, dispatch and settlement payments so that the outcomes of the market can be understood prior to the market being implemented;

z Determination of cash flows for different entities to determine whether any individual market participants will experience any financial ‘shocks’ in the market and/or to determine the implications on electricity prices and commercial viability in general;

z A fully scriptable interface to the model objects allowing the user to define additional rules in the simulation or postsimulation as required.