<p>One minor point- it could be that the factory schedules labor and other factors of production (coal deliveries, etc) in daily increments, and therefore pricing is fixed within each increment.</p>

CC BY-SA 4.0
2020-10-21T16:28:22.973Z
2020-10-21T16:28:22.973Z
RegressForward
<p>I was wondering why the supply curve of a power plant in the auction for the Day-Ahead Market is stepwise increasing and not a continuous function with first and second derivative strictly positive.
I am thinking of a gas plant (CCGT), the amount of fuel to be used can be adjusted continuously and not discretely, am I wrong?</p>

CC BY-SA 4.0
2020-10-20T13:54:38.613Z
Since prices are quantized, can’t meet the formal definition of continuous. After that, it might just come down to the preferences of whoever is managing the pricing at the plant as to how many pricing points they want to use. Without details of the auction process, the odds of anyone here knowing the answer is low.
Brian Romanchuk
CC BY-SA 4.0
2020-10-21T14:43:52.050Z
Thank you for your comment.  
I was wondering why they would do a choice like this since, from a mathematical point of view, it requires to solve a non-convex optimization when looking for the intersection of supply and demand
Virginie
CC BY-SA 4.0
2020-10-21T14:49:19.597Z
I don’t know anything about electricity auctions, but surely it’s a fairly simple algorithm once all orders are entered? Or are you referring to the utility’s profit calculation?
Brian Romanchuk
<supply-and-demand><energy-economics>
Why offer curves of a power plant are stepwise increasing?
Virginie
# Why offer curves of a power plant are stepwise increasing?

(Asked by: username_0 on 2020-10-20)

I was wondering why the supply curve of a power plant in the auction for the Day-Ahead Market is stepwise increasing and not a continuous function with first and second derivative strictly positive.
I am thinking of a gas plant (CCGT), the amount of fuel to be used can be adjusted continuously and not discretely, am I wrong?

**Tags:** supply-and-demand, energy-economics
> **Comments:**
> **username_1**: Since prices are quantized, can’t meet the formal definition of continuous. After that, it might just come down to the preferences of whoever is managing the pricing at the plant as to how many pricing points they want to use. Without details of the auction process, the odds of anyone here knowing the answer is low.  
> **username_0**: Thank you for your comment.   I was wondering why they would do a choice like this since, from a mathematical point of view, it requires to solve a non-convex optimization when looking for the intersection of supply and demand  
> **username_1**: I don’t know anything about electricity auctions, but surely it’s a fairly simple algorithm once all orders are entered? Or are you referring to the utility’s profit calculation?  

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## 1 answers

### Answer by username_2 on 2020-10-21. Score: 1 | Accepted answer

One minor point- it could be that the factory schedules labor and other factors of production (coal deliveries, etc) in daily increments, and therefore pricing is fixed within each increment.


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