Market clearing is getting more complex. N-SIDE can handle it

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Energy markets are becoming more complex, and market clearing solutions need to evolve to keep up. 

That means taking on more orders, more constraints, more time frames, and more locations — and still returning results that are optimal, understandable, and transparent. 

It's one thing to meet these challenges in a small local market. It's another to continue delivering results at scale for bigger markets that span borders and zones.

That’s where N-SIDE’s Power Matching Algorithm comes in. Despite the growing complexity and scale of power markets, our technology continues to provide optimal results fast. 

Let’s take a closer look at how N-SIDE’s Power Matching Algorithm is handling these challenges:

The state of market clearing

Energy market clearing is the process of matching supply and demand by pursuing an objective (e.g.  maximizing social welfare or minimizing procurement costs) while respecting given constraints (e.g. rules coming from the products traded, the network limits or the market regulation).

Many of the large-scale trends impacting the energy sector as a whole — including the increasing interconnectedness of energy markets and the proliferation of renewable energy resources — make modern market clearing more complex.

Indeed, today’s market clearing solutions must be able to handle a much larger pool of orders. From the production side, smaller production units tend to increase the number of bids in the market. In addition, an increase in the volume traded also comes from the demand side, because of the general trend toward increased electricity consumption. 

All this without forgetting to be able to handle a higher time granularity in trades, in order to better integrate intermittent renewable energy resources into the system. This last point should not be underestimated since, for example, adopting 15-minute orders instead of 60-minutes orders will tend to make the market clearing problem more than 4 times harder algorithmically-speaking.

While all of these factors make market clearing more complex, they also increase the potential to improve social welfare through an efficient solution that produces more optimal results.

 

N-SIDE's Power Matching Algorithm can handle it

N-SIDE’s Power Matching Algorithm optimally matches electricity supply and demand using a closed-gate auction approach. It works fast and delivers optimal, understandable, and transparent results, even in large-scale markets. 

Our Power Matching Algorithm lets market participants use a wide range of bid types to best reflect their offer or need. 

Meanwhile, system operators can provide various network restraints for consideration at the market clearing stage, ensuring the market stays in a safe operating zone

 

How does it work?

The Power Matching Algorithm takes inputs such as order books, network data, and market rules and matches supply and demand optimally while respecting network and asset constraints and avoiding potential congestion. 

Under the hood, the auction optimization algorithm uses mixed-integer linear and quadratic programming, in addition to custom heuristics which make it able to cope with a large number of binary variables.

The algorithm typically returns the following outputs for each time period and geographical area:

  • Market prices

  • Activated volumes

  • Allocated capacities

  • Congestion rents

Importantly, the algorithm is transparent. It uses clear and publicly available market rules, and N-SIDE is focused on increasing the understanding and reproducibility of results. 

 

Is it flexible?

N-SIDE’s Power Matching technology has been deployed in different markets around the world including in Europe and India, and can be customized to meet the needs of every market, no matter the complexity. 

It can be used for various market time frames, including long-term, day-ahead, and close to real-time clearing. 

 

Is it fast?

Fast resolution of complex auctions is what enables the future growth of the market and the grid. At N-SIDE, we understand that speed is a necessary component of an advanced market clearing solution. 

Even with datasets as large and complex as the European Single Day-Ahead Coupling (SDAC) market, the algorithm developed by N-SIDE delivers optimal results in no more than 17 minutes.

 

EUPHEMIA: A Power Matching success story

PCR EUPHEMIA is the market-clearing algorithm developed by N-SIDE for European SDAC. It matches supply and demand across 26 European countries for an average daily value of 200 million € in matched trades. 

EUPHEMIA demonstrates the capabilities of N-SIDE’s power matching technology. Despite the large scale of the market, unusual constraints (non-linear constraints along with some variables that could only take integer values), and the complexity of the bids, the algorithm is still able to rapidly produce optimal outputs and meet the high standards of stakeholders throughout Europe. 

The algorithm is also versatile enough to cover a wide range of market designs, including ATC, flow-based, and evolved flow-based models.

PCR EUPHEMIA by the numbers

PCR Euphemia by the numbers

 

 

Need a customizable, efficient, proven market clearing solution? Contact N-SIDE

 

About the Author

Pierre is an Engineer and Economist active in market-oriented projects at N-SIDE. He has contributed to the recent Euphemia R&D achievements and to the deployment of our Power Matching Algorithm in India. He also works for system operators by designing and delivering solutions for local and balancing markets. Pierre is now the Product Business Owner of the N-SIDE Power Matching Algorithm, shaping how our market clearing offer can evolve to allow even more end-consumers worldwide to get access to cheaper and cleaner electricity.

Pierre Crucifix

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