Modeling, simulation, and decision support

Official URL: https://dx.doi.org/10.1016/B978-0-12-820074-2.00017-4

Energy markets are intertwined and complex systems that influence and are affected by various sectors such as transportation, industry, and electric power. Solely focusing on the power sector without considering the up-and downstream of the supply chain may produce misleading results. For instance, the mixture of primary energy carriers and the procurement source affect the generation cost of electricity and consequently may alter the decisions of generation companies about future investments. Therefore researchers should carefully decide a reasonable trade-off between complexity and simplicity based on the determined level of detail and questions at hand. In this section, top-down and bottom-up modeling approaches are discussed, with their corresponding pros and cons, in the broader context of energy markets. Then, we focus on different modeling techniques in the established electricity markets. Finally, we demonstrate the unique modeling challenges that should be dealt with in emerging local electricity markets.