Given the nature of the electricity distribution business, characterized as a natural monopoly, auctions are the optimal and most transparent mechanism for the purchase of energy and power. In the specific case of electrical energy, multi-product reverse auctions are held. This refers to a mechanism in which generators make bids, with those that minimize the total cost of purchase being selected.
Determining the optimal set of offers is a great challenge, since many factors influence it, such as:
• Generation Technology
• Type of contract selected, depending on the product to be sold (energy and/or power)
• Demand profile to be supplied
• Expected spot prices
Quantum has developed an energy and power purchase optimization model, called OPTIME, which uses mixed programming to solve the problem. The objective function (total cost) to be minimized in a real energy and power auction has hundreds of thousands of variables, so the system has been developed using world leading software. OPTIME is developed in a web environment, allowing each user to test and analyze sensitivities.