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Market Power in a Power Market with Transmission Constraints

Author

Listed:
  • Bjørndal, Mette

    (Dept. of Business and Management Science, Norwegian School of Economics)

  • Gribkovskaia, Victoria

    (Dept. of Business and Management Science, Norwegian School of Economics)

  • Jörnsten, Kurt

    (Dept. of Business and Management Science, Norwegian School of Economics)

Abstract

In this paper we present a model for analysing the strategic behaviour of a generator and its short run implications on an electricity network with transmission constraints. The problem is formulated as a Stackelberg leader-follower game. The upper level problem is generator’s profit maximisation subject to the solution of the lower level problem of optimal power flow (OPF) solved by system operator. Strategic bidding is modelled as an iterative procedure where the supply functions of the competitive fringe are fixed while the strategic player’s bids are changed in a successive order until the bid giving maximum profit is found. This application rests on the assumption of supply function Nash equilibrium when the supplier believes that changes in his bids will not influence other actors to alter their bid functions. Numerical examples are presented on a simple triangular network.

Suggested Citation

  • Bjørndal, Mette & Gribkovskaia, Victoria & Jörnsten, Kurt, 2014. "Market Power in a Power Market with Transmission Constraints," Discussion Papers 2014/29, Norwegian School of Economics, Department of Business and Management Science.
    • Handle: RePEc:hhs:nhhfms:2014_029
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    File URL: http://hdl.handle.net/11250/217645
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    References listed on IDEAS

    as
    1. Berry, Carolyn A. & Hobbs, Benjamin F. & Meroney, William A. & O'Neill, Richard P. & StewartJr, William R., 1999. "Understanding how market power can arise in network competition: a game theoretic approach," Utilities Policy, Elsevier, vol. 8(3), pages 139-158, September.
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    3. Hu, X. & Ralph, D. & Ralph, E.K. & Bardsley, P. & Ferris, M.C., 2004. "Electricity Generation with Looped Transmission Networks: Bidding to an ISO," Cambridge Working Papers in Economics 0470, Faculty of Economics, University of Cambridge.
    4. William W. Hogan, 1997. "A Market Power Model with Strategic Interaction in Electricity Networks," The Energy Journal, International Association for Energy Economics, vol. 0(Number 4), pages 107-141.
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Electric power market; Supply function equilibria; Bilevel games; Strategic energy bidding; Irrelevant constraints;
    All these keywords.

    JEL classification:

    • Q00 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - General - - - General

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