The AMES Wholesale Power Market Test Bed as a Stochastic Dynamic State-Space Game

The AMES Wholesale Power Market Test Bed is an agent-based computational laboratory designed for the systematic experimental study of restructured wholesale power markets. These notes show how AMES can be recast in more standard state-space equation form. The result is a highly nonlinear and highly coupled system of first-order stochastic difference equations. The AMES state-space equation representation is used to explain how AMES constitutes an open-ended dynamic game among multiple strategically-learning players. It is also used to explain how AMES permits the development and experimental study of a wide variety of test cases. The AMES Wholesale Power Market Test Bed has been developed by a group of researchers at Iowa State University to facilitate the systematic experimental study of restructured wholesale power markets. The release of AMES(V1.31) was announced at the IEEE Power and Energy Systems General Meeting in June 2007, and the release of AMES(V2.01) was announced at the IEEE Power and Energy Systems General Meeting in July 2008. AMES is an acronym for Agent-based M odeling of E lectricity Systems. AMES is “agent based” in the sense that it is a computationally constructed virtual world comprising multiple agents (encapsulated software programs) whose various interactions drive all world events over time. Here “agents” must be broadly interpreted to include structural entities (e.g., transmission grids), institutional entities (e.g., markets), non-cognitive biological entities (e.g., switchgrass crops), and cognitive entities (e.g., energy traders and market operators). As is true for any agent-based model, AMES is most naturally explained in terms of verbal descriptions, diagrams, and pseudo-code expressing the logical flow of agent processes and interactions over time, as an accompaniment to the actual source code. Detailed descriptions of AMES taking these forms can be found in [4, 5, 6], and the source code for the latest AMES version release can be found at the AMES home page [7]. In contrast, models within economics and power systems are typically represented as systems of equations. The question then arises whether AMES can be represented as a system of equations. Moreover, if so, what use can be made of this representation? The purpose of these notes is three-fold. First, I will demonstrate how AMES can be recast in more standard state-space equation form. The result is a highly nonlinear and highly coupled system of first-order stochastic difference equations. Second, I will use the AMES state-space equation representation to explain how AMES constitutes an open-ended dynamic game among multiple ∗Helpful comments from Jim McCalley, Sarah Ryan, and Nanpeng Yu are greatly appreciated. 1See [1] for extensive introductory resources on agent-based computational modeling, including tutorials, readings, software, and websites. Comprehensive surveys of agent-based research in many different economic application areas can be found in [2]; agent-based research specifically focused on electricity markets is highlighted at [3].