Stochastic energy market equilibrium modeling with multiple agents. (1st September 2017)

• Record Type: Journal Article
• Authors: Brekke, Kjell Arne; Golombek, Rolf; Kaut, Michal; Kittelsen, Sverre A.C.; Wallace, Stein W.
• Is Part Of: Energy. Volume 134(2017)
• Page Start: 984
• Page End: 990
• Publication Date: 2017-09-01
• Subjects: Uncertainty -- Stochastic equilibrium -- Monte Carlo -- Energy modeling; C63 -- C68 -- D58 -- D81 -- Q28 -- Q40 -- Q54; Power resources -- Periodicals; Power (Mechanics) -- Periodicals; Energy consumption -- Periodicals; 333.7905
• DOI: 10.1016/j.energy.2017.06.056
• Languages: English
• ISSNs: 0360-5442

Abstract

Abstract: The energy markets are characterized by many agents simultaneously solving decision problems under uncertainty. It is argued that Monte Carlo simulations are not an adequate way to assess behavioral uncertainty; one should rather rely on stochastic modelling. Drawing on economics, decision theory and operations research, a simple guide on how to transform a deterministic energy market equilibrium model - where several agents simultaneously make decisions - into a stochastic equilibrium model is offered. With our approach, no programming of a stochastic solution algorithm is required. Highlights: Analyze energy investment decisions that are taken before the uncertainty is revealed. Criticism of Monte Carlo simulations to assess behavioral uncertainty. Guide to transform a deterministic energy model into a stochastic model. No programming of a stochastic solution algorithm is required.