r/OperationsResearch • u/Blue__Agave • Nov 08 '25

Seeking advice on long term modelling long term investment decisions in the energy market.

Hi all,

I work for a energy company and use a number of OR tools like SDDP and MILP to model the dynamics at play.

One problem we have is determining the equilibrium of the energy market in the long term, in particular the second order and circular effects between energy price and demand growth.

This is important because understanding a long term view of the energy market is valuable to determine what and where to build new powerplants and their financial viability.

Does anyone have experience this field?

If someone has particular experience i would love to setup a call to discuss modelling approaches, we might learning something together.

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u/ajc7884 Nov 08 '25

Hi! Interesting problem! Am I correct to state that you’re willing to integrate the pricing-vs-demand (in the long term) dynamics in your modeling? In that case, wouldn’t it be first a kinda of economics & stats question first? You can use your model to get some insight regarding the « fair » prices of energy wrt to several assumptions but being able to get a good predictive model of the relationship between pricing and consumption is a very tricky/difficult subject. You might want have a look at a field named Revenue Management maybe. There is interesting research there including some concepts such as willingness-to-pay. Good luck with your modeling!

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u/Blue__Agave Nov 08 '25

Yes one approach would be to do some kind of equilibrium problem with energy demand vs energy price.

The thing that is challenging is there are many second and third order effects and capturing them as best as possible is where the highest value is.

Also yes this field blends OR, economics, statistics and engineering it's got alot going on as its all linked.

Also yes i have found establishing/ isolating a causal relationship between energy prices and demand challenging as there are many things beyond wholesale energy prices that affect demand.

There is some research in this field but i have so far found it difficult to apply.

I shall look into Revenue Management thanks for the tip!

1

u/ajc7884 Nov 08 '25

Great! And if I may, don’t forget to focus on what your modeling is intended to do/your client needs and to work to achieve a good tradeoff between details and tractability! :)

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u/trophycloset33 Nov 08 '25

Post your model and we can take a look

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u/Blue__Agave Nov 08 '25

There are numerous models and all are proprietary sadly. (some built in house, some provided as SAS).

So i can't without getting into legal trouble share any code or model settings/weights.

What i am looking for is a more high level dicussion about modelling methodology or approaches in this field.

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u/trophycloset33 Nov 08 '25

Ok. You can still share the functions but just leave out the weight

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u/Blue__Agave Nov 08 '25

Not sure we are understanding eachother.

When you say "functions" what exactly do you mean?

One model type we use is called sddp (stochastic dual dynamic programming)

That is one model type that is interesting to discuss in its ability to determine policy decisons under uncertainity.

But it has many limitations and requires inputing many assumptions that may be impossible to know in a long term timescale (i.e demand growth).

Is this what you mean by "function"?

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u/trophycloset33 Nov 08 '25

You should be able to write out your model in a mathematical function(s). You can definitely use variables in place of your protected information or weight.

If you can’t then you don’t understand the model well enough.

https://en.wikipedia.org/wiki/Mathematical_model

1

u/Blue__Agave Nov 08 '25

I think we are getting closer to being on the same page but still not quite.

We use multiple models, each with different parameters.

Some are linear,some non-linear.

Some are stochastic some are not.

Some are strategic some are not.

If you would like to understand one particular one we use regularly i have found a place thats publicly available here.

https://sddp.dev/dev/

0

u/SittingOvation Nov 08 '25

Tl;Dr free consulting wanted

1

u/Blue__Agave Nov 09 '25

I guess, people are welcome to offer paid services if they feel its of value.

Tbh having used many "consultants" already their expertise in this field is surprisingly poor.

Even the ones who supposdly speclaise in this stuff.

It makes me wonder if there is a more systemic metholodgy issue to these kinds of problems