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Interaction among competitive producers in the electricity market: An iterative market model for the strategic management of thermal power plants

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  • Carraretto, Cristian
  • Zigante, Andrea

Abstract

The liberalization of the electricity sector requires utilities to develop sound operation strategies for their power plants. In this paper, attention is focused on the problem of optimizing the management of the thermal power plants belonging to a strategic producer that competes with other strategic companies and a set of smaller non-strategic ones in the day-ahead market. The market model suggested here determines an equilibrium condition over the selected period of analysis, in which no producer can increase profits by changing its supply offers given all rivals’ bids. Power plants technical and operating constraints are considered. An iterative procedure, based on the dynamic programming, is used to find the optimum production plans of each producer. Some combinations of power plants and number of producers are analyzed, to simulate for instance the decommissioning of old expensive power plants, the installation of new more efficient capacity, the severance of large dominant producers into smaller utilities, the access of new producers to the market. Their effect on power plants management, market equilibrium, electricity quantities traded and prices is discussed.

Suggested Citation

  • Carraretto, Cristian & Zigante, Andrea, 2006. "Interaction among competitive producers in the electricity market: An iterative market model for the strategic management of thermal power plants," Energy, Elsevier, vol. 31(15), pages 3145-3158.
    • Handle: RePEc:eee:energy:v:31:y:2006:i:15:p:3145-3158
    DOI: 10.1016/j.energy.2006.02.012
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    References listed on IDEAS

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    Cited by:

    1. Foley, A.M. & Ó Gallachóir, B.P. & Hur, J. & Baldick, R. & McKeogh, E.J., 2010. "A strategic review of electricity systems models," Energy, Elsevier, vol. 35(12), pages 4522-4530.
    2. Kamiński, Jacek, 2011. "Market power in a coal-based power generation sector: The case of Poland," Energy, Elsevier, vol. 36(11), pages 6634-6644.
    3. Haas, Reinhard & Lettner, Georg & Auer, Hans & Duic, Neven, 2013. "The looming revolution: How photovoltaics will change electricity markets in Europe fundamentally," Energy, Elsevier, vol. 57(C), pages 38-43.
    4. Auer, Hans & Haas, Reinhard, 2016. "On integrating large shares of variable renewables into the electricity system," Energy, Elsevier, vol. 115(P3), pages 1592-1601.
    5. Wang, Jianhui & Zhou, Zhi & Botterud, Audun, 2011. "An evolutionary game approach to analyzing bidding strategies in electricity markets with elastic demand," Energy, Elsevier, vol. 36(5), pages 3459-3467.

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