Professor EmeritusEddie Anderson

Professor Eddie Anderson began his research career by studying scheduling theory and also the modelling of optimization problems in which the decision variable is a function: these are infinite dimensional optimization problems. More recently Eddie has focussed on the competitive interaction between firms in a supply chain context. If the number of firms is small (an oligopoly), then game theory gives some guidance as to what will happen. There are applications in many areas, but he has a particular interest in what happens in wholesale electricity markets. The balance between supply (the generators) and demand (the retailers) will determine the final price, but who will make money and how much?

An interesting aspect of wholesale electricity markets is that bids consist of a whole schedule of prices and quantities rather than just a single price or a single quantity. This makes it important to analyse optimal bidding (and also equilibria) when the players have to decide on a whole supply function. In a series of paper from 2002 to 2013 Eddie Anderson showed how to analyse markets in which participants make supply function offers. Much of this work has been joint with Professor Andy Philpott from the University of Auckland.

In all market places there is uncertainty about future prices, and we cannot understand the competition occurring in electricity markets without understanding and modelling this uncertainty. A big part of Eddie’s research is concerned with models that include a stochastic element. When outcomes are uncertain it is no longer enough to simply assume that everyone maximises the profit they expect to make. Instead firms are guided by the need to avoid taking on too much risk. In many markets, including electricity, firms limit their risk by buying or selling financial derivatives. We would like to know the impact of this on firm profits. So answering questions about competition forces us to consider risk and uncertainty at the same time. Eddie has a number of papers (and a book) on risk: looking at how individuals and firms can make good decisions when there are risks attached to their actions.

The increasing use of renewables and the possibility of widespread electric vehicle usage in the future is changing the way that the electricity grid operates and providing many challenges. Eddie has expertise in electricity trading issues and these are intimately connected with the structural changes taking place in the electricity supply system: solutions need to account for both engineering and financial realities.