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Region Capacity Shadow Price

Units:$/kW/yr
Mode:Output Only
Multi-band:False
Default Value:
Validation Rule:
Key Property:No
Description:Shadow price of capacity

Region Capacity Shadow Price is reported only by LT Plan and is the incremental value of capacity. The method of calculation of this property depends on the LT Plan Optimality setting. If this is set to "Linear Relaxation" then the capacity shadow price is equal to the value of the dual variable associated with the capacity balance constraint for the Region. Because expansion decisions in "Linear Relaxation" mode are continuous this dual variable will always equal the incremental cost to the system as a whole of adding the last unit of capacity.

However, if the setting is "Integer Optimal", then the lumpy nature of the expansion decisions means that the dual variable on the capacity balance constraint will most-often be zero and so cannot be relied upon. The capacity shadow price can be estimated by examining all the 'new build' Generators in the Region and calculating the premium that would be required to exactly compensate for any losses i.e where the Generator Pool Revenue is not sufficient to cover the annualized Generator Build Cost.

The required premium calculation includes:

This premium is calculated using the following steps:

  1. Calculate Fraction Built: This represents the ratio of capacity built to the total installed capacity of the generator.
    • Fraction Built = Capacity Built / Installed Capacity

  2. Calculate Current Loss: This calculates the generator's financial loss after factoring in net revenue, build cost, and generator participation factor (GPF).
    • Current Loss = (Net Revenue × Fraction Built) − (Build Cost × Generator Participation Factor (GPF))

  3. Calculate Premium (for each generator): This determines the premium required to compensate for the generator's loss.
    • Premium i = Current Loss / Firm Capacity of Generator i

  4. Determine Max Premium: Identify the maximum premium value across all generators in the region.
    • Max Premium = max⁡ (Premium of all generators)

  5. Calculate Capacity Shadow Price: Use the maximum premium and scale it based on the expansion discount period type.
    • Capacity Shadow Price = Max Premium × Premium Scalar / 1000

Premium Scalar depends on the expansion discount period type:

See also: