On Monte Carlo simulation of electricity markets with uncertainties in precipitation and load forecasts

Long-term planning of a power system requires that the electricity market can be simulated. One important aspect that should be simulated is that the owners of hydro power plants with reservoirs (generally referred to as dispatchable hydro power) are forced to base their scheduling on uncertain forecasts on precipitation and load. It is inevitable that this lack of perfect information has an impact on the operation costs and reliability of the system. Hence, a simulation of an electricity market should include this property of dispatchable hydro, power. This paper shows how the consequences of hydro power planning based on uncertain forecasts can be incorporated in a Monte Carlo model by using random water value errors.