Operational use of marginal cost curves for a hydropower producer trading in the intraday market

In this paper we investigate the use of marginal cost curves for bidding and offering electricity in a continuous intraday market. Due to the real-time nature of the market, trading decisions must be supported in a computationally efficient manner. Taking the view of a price-taking hydropower producer, we calculate marginal cost curves heuristically for the entire working area of the plant. These curves are then used in a simulation framework where a new market event invokes a trading decision and a rescheduling process. The simulation framework is tested for a Norwegian hydropower producer responding to historical prices from the German EPEX SPOT Intraday market in order to illustrate future market conditions. We estimate a 2% increase of revenues, and interpret this as an upper bound for the particular hydropower plant.