1. assume that the power plants have fixed costs as follows:

• Plant A: $50
• Plant B: $20
• Plant C: $15
• Plant D: $10
• Plant E: $5

a fixed cost is one that does not vary with output, and must be paid regardless of how much electricity the plant generates

Suppose that a 50 MW wind plant entered this hypothetical market. This wind plant has zero marginal cost but fixed costs of 15.

A) Assuming that demand is 55 MWh in some particular hour, calculate the SMP and the profits of each generator. What capacity payment would be needed for each plant to ensure that the generators did not lose money? (Note: if you calculate that a power plant does not need a capacity payment, your response should be $0, not a negative number.)

B) Now answer the same questions, assuming that total demand is 80 MWh.

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