A Unique Competitive Equilibrium on Interdependent Spot Electricity and Reserve Capacity Markets
AbstractThis paper studies the interdependency of a spot electricity market and a market for incremental reserve capacity in a competitive setting, where a continuum of ﬁrms supplies both markets. It is proved that a simultaneous competitive equilibrium on both markets exists in the stylised model used. It turns out that all market equilibria are characterised essentially by a u-shaped reserve capacity market bidding function and that the set of suppliers declaring reserve capacity constitutes an interval. If the supplier’s marginal cost curve is convex, then a unique equilibrium exists.
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Bibliographic InfoPaper provided by Energiewirtschaftliches Institut an der Universitaet zu Koeln in its series EWI Working Papers with number 2011-9.
Length: 22 pages
Date of creation: 23 Aug 2011
Date of revision:
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Competitive Equilibrium; Electricity; Reserve Capacity; Simultaneous Equilibrium;
Find related papers by JEL classification:
- D41 - Microeconomics - - Market Structure and Pricing - - - Perfect Competition
- D44 - Microeconomics - - Market Structure and Pricing - - - Auctions
- L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
- L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities
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- Felix Müsgens, 2006. "QUANTIFYING MARKET POWER IN THE GERMAN WHOLESALE ELECTRICITY MARKET USING A DYNAMIC MULTI-REGIONAL DISPATCH MODEL -super-* ," Journal of Industrial Economics, Wiley Blackwell, vol. 54(4), pages 471-498, December.
- Ali Hortaçsu & Steven L. Puller, 2008. "Understanding strategic bidding in multi-unit auctions: a case study of the Texas electricity spot market," RAND Journal of Economics, RAND Corporation, vol. 39(1), pages 86-114.
- Anna Creti & Natalia Fabra, 2003. "Capacity Markets for Electricity," Industrial Organization 0309002, EconWPA, revised 26 Nov 2003.
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