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A Mean-Field Game Model of Electricity Market Dynamics

In: Quantitative Energy Finance

Author

Listed:
  • Alicia Bassière

    (CREST, ENSAE, Institut Polytechnique de Paris)

  • Roxana Dumitrescu

    (King’s College London)

  • Peter Tankov

    (CREST, ENSAE, Institut Polytechnique de Paris)

Abstract

We develop a model for the long-term dynamics of electricity market, based on mean-field games of optimal stopping. Our paper extends the recent contribution (Aïd et al., J. Dyn. Games 8(4):331, 2021) in several ways, making the model much more realistic, especially for describing the medium-term impacts of energy transition on electricity markets. In particular, we allow for an arbitrary number of technologies with endogenous fuel prices, introduce plant construction time and enable the agents to both invest and divest. This makes it possible to describe the role of gas generation as a medium-term substitute for coal, to be replaced by renewable generation in the long term, and enables us to model the events like the 2022 energy price crisis.

Suggested Citation

  • Alicia Bassière & Roxana Dumitrescu & Peter Tankov, 2024. "A Mean-Field Game Model of Electricity Market Dynamics," Springer Books, in: Fred Espen Benth & Almut E. D. Veraart (ed.), Quantitative Energy Finance, pages 181-219, Springer.
    • Handle: RePEc:spr:sprchp:978-3-031-50597-3_5
    DOI: 10.1007/978-3-031-50597-3_5
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