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A Dynamic Oligopolistic Electricity Market with Interdependent Market Segments

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  • Pierre-Olivier Pineau
  • Hasina Rasata
  • Georges Zaccour

Abstract

We propose a deterministic, discrete-time, finite-horizon oligopoly model to investigate investment and production equilibrium strategies, in a setting where demand evolves over time and the two market-segment loads (peak-and base-load) are interdependent. The players (generators) compete a` la Cournot, open-loop Nash equilibria are computed and numerical results are discussed. The model is calibrated with data from Ontario, Canada. We assess the impact on equilibrium strategies of a generation sector with more market power than what is actually the case. We also find a slight difference in the investment sequence when interdependent demand segments are considered. Finally, we analyze the impact of increasing demand elasticities over time, and varying the financial values of the production capacities that remain at the end of the planning horizon. We believe that such a tool is valuable for professionals and scholars interested in the dynamics of production capacity mix (portfolio of technologies) in the electricity sector. It is also of paramount importance for public decision makers who have to simultaneously deal with environmental issues and with price control, both of which are politically sensitive.

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Bibliographic Info

Article provided by International Association for Energy Economics in its journal The Energy Journal.

Volume (Year): Volume 32 (2011)
Issue (Month): Number 4 ()
Pages: 183-218

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Handle: RePEc:aen:journl:32-4-a08

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Cited by:
  1. Schröder, Andreas, 2012. "An Electricity Market Model with Generation Capacity Investment under Uncertainty," Annual Conference 2012 (Goettingen): New Approaches and Challenges for the Labor Market of the 21st Century 62068, Verein für Socialpolitik / German Economic Association.
  2. Pineau, Pierre-Olivier & Rasata, Hasina & Zaccour, Georges, 2011. "Impact of some parameters on investments in oligopolistic electricity markets," European Journal of Operational Research, Elsevier, vol. 213(1), pages 180-195, August.
  3. Yihsu Chen & Andrew Liu, 2013. "Emissions trading, point-of-regulation and facility siting choices in the electric markets," Journal of Regulatory Economics, Springer, vol. 44(3), pages 251-286, December.
  4. Tanaka, Makoto & Chen, Yihsu, 2013. "Market power in renewable portfolio standards," Energy Economics, Elsevier, vol. 39(C), pages 187-196.

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