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Strategic bidding and rebidding in electricity markets

Author

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  • Clements, A.E.
  • Hurn, A.S.
  • Li, Z.

Abstract

Successful deregulation in electricity markets depends crucially on the ability of market regulation to promote and maintain free competition. There are, however, important physical characteristics in electricity markets, such as the constraints imposed by the physical transmission infrastructure, that have the potential to undermine competition and provide opportunities for market participants to exploit temporary positions of market power. In this paper, the regional market of Queensland, Australia is analysed. It is found that strategic behaviour by generators exists and is closely related to the occurrence of the kind of extreme price events that characterise many deregulated electricity markets. In addition, rebidding behaviour by base-load generators immediately after extreme price events is shown to have negative impacts on the operation of the market. The key message is that promotion of competition in electricity markets can have undesirable consequences unless the regulatory policy is carefully designed to counter strategic behaviour by market participants.

Suggested Citation

  • Clements, A.E. & Hurn, A.S. & Li, Z., 2016. "Strategic bidding and rebidding in electricity markets," Energy Economics, Elsevier, vol. 59(C), pages 24-36.
    • Handle: RePEc:eee:eneeco:v:59:y:2016:i:c:p:24-36
    DOI: 10.1016/j.eneco.2016.07.011
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    4. Yang, Peiwen & Dong, Jun & Lin, Jin & Liu, Yao & Fang, Debin, 2021. "Analysis of offering behavior of generation-side integrated energy aggregator in electricity market:A Bayesian evolutionary approach," Energy, Elsevier, vol. 228(C).
    5. Poplavskaya, Ksenia & Lago, Jesus & de Vries, Laurens, 2020. "Effect of market design on strategic bidding behavior: Model-based analysis of European electricity balancing markets," Applied Energy, Elsevier, vol. 270(C).
    6. Carlo Mari & Emiliano Mari, 2021. "Gaussian clustering and jump-diffusion models of electricity prices: a deep learning analysis," Decisions in Economics and Finance, Springer;Associazione per la Matematica, vol. 44(2), pages 1039-1062, December.
    7. Lin Han & Ivor Cribben & Stefan Trueck, 2022. "Extremal Dependence in Australian Electricity Markets," Papers 2202.09970, arXiv.org.
    8. Antonello Rosato & Rosa Altilio & Rodolfo Araneo & Massimo Panella, 2017. "Prediction in Photovoltaic Power by Neural Networks," Energies, MDPI, vol. 10(7), pages 1-25, July.
    9. Oludamilare Bode Adewuyi & Mikaeel Ahmadi & Isaiah Opeyemi Olaniyi & Tomonobu Senjyu & Temitayo Olayemi Olowu & Paras Mandal, 2019. "Voltage Security-Constrained Optimal Generation Rescheduling for Available Transfer Capacity Enhancement in Deregulated Electricity Markets," Energies, MDPI, vol. 12(22), pages 1-16, November.
    10. Aithal, Avinash & Li, Gen & Wu, Jianzhong & Yu, James, 2018. "Performance of an electrical distribution network with Soft Open Point during a grid side AC fault," Applied Energy, Elsevier, vol. 227(C), pages 262-272.
    11. David P. Brown & Andrew Eckert & James Lin, 2018. "Information and transparency in wholesale electricity markets: evidence from Alberta," Journal of Regulatory Economics, Springer, vol. 54(3), pages 292-330, December.
    12. Hung Do & Rabindra Nepal & Russell Smyth, 2020. "Interconnectedness in the Australian National Electricity Market: A Higher‐Moment Analysis," The Economic Record, The Economic Society of Australia, vol. 96(315), pages 450-469, December.
    13. Jérôme De Boeck & Luce Brotcorne & Bernard Fortz, 2022. "Strategic bidding in price coupled regions," Mathematical Methods of Operations Research, Springer;Gesellschaft für Operations Research (GOR);Nederlands Genootschap voor Besliskunde (NGB), vol. 95(3), pages 365-407, June.
    14. Mayer, Klaus & Trück, Stefan, 2018. "Electricity markets around the world," Journal of Commodity Markets, Elsevier, vol. 9(C), pages 77-100.
    15. Lu, Ye & Suthaharan, Neyavan, 2023. "Electricity price spike clustering: A zero-inflated GARX approach," Energy Economics, Elsevier, vol. 124(C).
    16. Mwampashi, Muthe Mathias & Nikitopoulos, Christina Sklibosios & Rai, Alan & Konstandatos, Otto, 2022. "Large-scale and rooftop solar generation in the NEM: A tale of two renewables strategies," Energy Economics, Elsevier, vol. 115(C).
    17. Carlo Lucheroni & Carlo Mari, 2021. "Internal hedging of intermittent renewable power generation and optimal portfolio selection," Annals of Operations Research, Springer, vol. 299(1), pages 873-893, April.
    18. Mardi Dungey & Ali Ghahremanlou & Ngo Van Long, 2017. "Strategic Bidding of Electric Power Generating Companies: Evidence from the Australian National Energy Market," CESifo Working Paper Series 6819, CESifo.
    19. Ni Lei & Lanyun Chen & Chuanwang Sun & Yuan Tao, 2018. "Electricity Market Creation in China: Policy Options from Political Economics Perspective," Sustainability, MDPI, vol. 10(5), pages 1-15, May.
    20. Morvaj, Boran & Evins, Ralph & Carmeliet, Jan, 2017. "Decarbonizing the electricity grid: The impact on urban energy systems, distribution grids and district heating potential," Applied Energy, Elsevier, vol. 191(C), pages 125-140.

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    More about this item

    Keywords

    Electricity market; Transmission constraints; Synchronisation time; Ramp-up rate; Strategic bidding; Rebidding; Counter-price flow;
    All these keywords.

    JEL classification:

    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy

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