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Market Equilibrium and Impact of Market Mechanism Parameters on the Electricity Price in Yunnan’s Electricity Market

Author

Listed:
  • Chuntian Cheng

    () (Institute of Hydropower System & Hydroinformatics, Dalian University of Technology, Dalian 116024, China)

  • Fu Chen

    () (Institute of Hydropower System & Hydroinformatics, Dalian University of Technology, Dalian 116024, China)

  • Gang Li

    () (Institute of Hydropower System & Hydroinformatics, Dalian University of Technology, Dalian 116024, China)

  • Qiyu Tu

    () (Yunnan Power Exchange, Kunming 650000, China)

Abstract

In this paper, a two-dimensional Cournot model is proposed to study generation companies’ (GENCO’s) strategic quantity-setting behaviors in the newly established Yunnan’s electricity market. A hybrid pricing mechanism is introduced to Yunnan’s electricity market with the aim to stimulate electricity demand. Market equilibrium is obtained by iteratively solving each GENCO’s profit maximization problem and finding their optimal bidding outputs. As the market mechanism is a key element of the electricity market, impacts of different market mechanism parameters on electricity price and power generation in market equilibrium state should be fully assessed. Therefore, based on the proposed model, we precisely explore the impacts on market equilibrium of varying parameters such as the number of GENCOs, the quantity of ex-ante obligatory-use electricity contracts (EOECs) and the elasticity of demand. Numerical analysis results of Yunnan’s electricity market show that these parameters have notable but different effects on electricity price. A larger number of GENCOs or less EOEC contracted with GENCOs will have positive effects on reducing the price. With the increase of demand elasticity, the price falls first and then rises. Comparison of different mechanisms and relationship between different parameters are also analyzed. These results should be of practical interest to market participants or market designers in Yunnan’s or other similar markets.

Suggested Citation

  • Chuntian Cheng & Fu Chen & Gang Li & Qiyu Tu, 2016. "Market Equilibrium and Impact of Market Mechanism Parameters on the Electricity Price in Yunnan’s Electricity Market," Energies, MDPI, Open Access Journal, vol. 9(6), pages 1-17, June.
  • Handle: RePEc:gam:jeners:v:9:y:2016:i:6:p:463-:d:72169
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    References listed on IDEAS

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    1. Woo, Chi-Keung, 2001. "What went wrong in California's electricity market?," Energy, Elsevier, vol. 26(8), pages 747-758.
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    Citations

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    Cited by:

    1. Javier Contreras, 2017. "Forecasting Models of Electricity Prices," Energies, MDPI, Open Access Journal, vol. 10(2), pages 1-2, January.

    More about this item

    Keywords

    market equilibrium; electricity price; Cournot model; market mechanism parameter;

    JEL classification:

    • Q - Agricultural and Natural Resource Economics; Environmental and Ecological Economics
    • Q0 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - General
    • Q4 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy
    • Q40 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - General
    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices
    • Q42 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Alternative Energy Sources
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy
    • Q47 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy Forecasting
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy
    • Q49 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Other

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