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The Role of Strategic Load Participants in Two-Stage Settlement Electricity Markets

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  • Pengcheng You
  • Dennice F. Gayme
  • Enrique Mallada

Abstract

Two-stage electricity market clearing is designed to maintain market efficiency under ideal conditions, e.g., perfect forecast and nonstrategic generation. This work demonstrates that the individual strategic behavior of inelastic load participants in a two-stage settlement electricity market can deteriorate efficiency. Our analysis further implies that virtual bidding can play a role in alleviating this loss of efficiency by mitigating the market power of strategic load participants. We use real-world market data from New York ISO to validate our theory.

Suggested Citation

  • Pengcheng You & Dennice F. Gayme & Enrique Mallada, 2019. "The Role of Strategic Load Participants in Two-Stage Settlement Electricity Markets," Papers 1903.08341, arXiv.org, revised Sep 2019.
    • Handle: RePEc:arx:papers:1903.08341
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    References listed on IDEAS

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    1. Celebi, Metin & Hajos, Attila & Hanser, Philip Q, 2010. "Virtual Bidding: The Good, the Bad and the Ugly," The Electricity Journal, Elsevier, vol. 23(5), pages 16-25, June.
    2. Hendrik Bessembinder & Michael L. Lemmon, 2002. "Equilibrium Pricing and Optimal Hedging in Electricity Forward Markets," Journal of Finance, American Finance Association, vol. 57(3), pages 1347-1382, June.
    3. Hadsell, Lester, 2007. "The impact of virtual bidding on price volatility in New York's wholesale electricity market," Economics Letters, Elsevier, vol. 95(1), pages 66-72, April.
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    Cited by:

    1. Ehsan Samani & Mahdi Kohansal & Hamed Mohsenian-Rad, 2021. "A Data-Driven Convergence Bidding Strategy Based on Reverse Engineering of Market Participants' Performance: A Case of California ISO," Papers 2109.09238, arXiv.org.

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