The optimal short-term management of flexible nuclear plants in a competitive electricity market as a case of competition with reservoir

In many countries, the electricity systems are quitting the vertically integrated monopoly organization for an operation framed by competitive markets. It therefore questions how nuclear plants should be operated in an open market framework. We address the medium-term horizon of management to take into account the fluctuations of demand according to the seasons of year. A flexible nuclear set (like the French) could be operated to follow a part of the demand variations. Since nuclear plants have to stop periodically to reload their fuel (every 12 or 18 months), we can analyze the nuclear fuel as a stock behaving like a reservoir. The flexible operation of the reservoir permits to get different nuclear fuel allocations according to the different levels of the seasonal demand. We then analyze it within a general deterministic dynamic framework with two types of generation: nuclear and thermal non-nuclear. We study the optimal management of the production in a perfectly competitive market. In this paper, we focus on the optimal short-term (monthly) production behaviour before moving to a yearly or multi-annual optimization. This constitutes a prudent research strategy of a flexible nuclear set leaving the monopoly organization and exploring how to reach a market equilibrium in a competitive market. Then, we set up a simple numerical model (based on data from the French market) given that the nuclear production set is managed in a flexible manner in order to follow the variations in demand (like the French nuclear set actually does). The marginal cost of nuclear production being (significantly) lower than the one of non-nuclear induces a discontinuity of producer's short-term profit. The problem of discontinuity makes the resolution of the optimal short-term production problem extremely complicated and even leads to a lack of solutions. That is why it is necessary to study an approximate problem (continuous problem) that constitutes a “regularization†of our economical problem (discontinuous problem). The simulations show why future demand has to be anticipated to manage the current use of the nuclear fuel reservoir. Moreover, to ensure the equilibrium between supply and demand, the management of the nuclear set has to take into account the thermal non-nuclear generation capacity