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A data-analytics approach for price cap formulation of electricity markets considering synergistic efficiency of generation and demand sides

Author

Listed:
  • Wu, Jiahao
  • Bao, Minglei
  • Sun, Xiaocong
  • Lin, Jianing
  • Ding, Yi

Abstract

Faced with increasingly frequent electricity price spikes during extreme events, the risk management of electricity prices has become critically important. To protect consumer interests and prevent anti-competitive behavior, market regulators have implemented price caps. A well-designed price cap can both reflect the value of electricity during peak periods and mitigate the economic burden on consumers during extreme events. However, setting a reasonable price cap is quite complex and involves multifaceted trade-offs. If the price cap is set too high, it may lead to an excessive transfer of consumer welfare to producers and incentivize anti-competitive behavior. Conversely, if the price cap is set too low, it may discourage power generators from providing sufficient electricity, thereby jeopardizing supply security during peak hours. To address this issue, this paper proposes a data-analytics approach for price cap formulation considering synergistic efficiency of generation and demand sides. Firstly, considering multiple uncertainties, probabilistic scenarios of electricity markets are generated and cleared to obtain massive electricity price data. On this basis, the investment recovery period and the elasticity coefficient for electricity consumption are established to comprehensively evaluate the impact of electricity price on the generation-demand side efficiency. Furthermore, a data-analytics optimal model for price cap considering synergistic efficiency is proposed, which balances the conflicting market objectives of the generation and demand sides. Finally, a provincial electricity market of southeast China is used to verify the performance superiority of the proposed approach. Case studies demonstrate that the proposed model can not only provide sufficient incentives for generators but also protect consumers from the impact of extreme electricity prices.

Suggested Citation

  • Wu, Jiahao & Bao, Minglei & Sun, Xiaocong & Lin, Jianing & Ding, Yi, 2025. "A data-analytics approach for price cap formulation of electricity markets considering synergistic efficiency of generation and demand sides," Energy, Elsevier, vol. 339(C).
    • Handle: RePEc:eee:energy:v:339:y:2025:i:c:s0360544225041532
    DOI: 10.1016/j.energy.2025.138511
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    References listed on IDEAS

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