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Network-constrained models of liberalized electricity markets: the devil is in the details

Author Info

Listed author(s):
  • Barquin, J.
  • Boots,M. G.
  • Ehrenmann, A.
  • Hobbs, B.F.
  • Neuhoff, K.
  • Rijkers, F. A. M.

Abstract

Numerical models for electricity markets are frequently used to inform and support decisions. How robust are the results? Three research groups used the same, realistic data set for generators, demand and transmission network as input for their numerical models. The results coincide when predicting competitive market results. In the strategic case in which large generators can exercise market power, the predicted prices differed significantly. The results are highly sensitive to assumptions about market design, timing of the market and assumptions about constraints on the rationality of generators. Given the same assumptions the results coincide. We provide a checklist for users to understand the implications of different modelling assumptions.

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File URL: http://www.econ.cam.ac.uk/electricity/publications/wp/ep32.pdf
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Paper provided by Faculty of Economics, University of Cambridge in its series Cambridge Working Papers in Economics with number 0405.

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Length: 34
Date of creation: Jan 2004
Handle: RePEc:cam:camdae:0405
Note: CMI32, IO
Contact details of provider: Web page: http://www.econ.cam.ac.uk/index.htm

Keywords: Market power; Electricity; Networks; Numeric models; Model comparison;

Find related papers by JEL classification:

  • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
  • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
  • L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities
  • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis

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  1. Cardell, Judith B. & Hitt, Carrie Cullen & Hogan, William W., 1997. "Market power and strategic interaction in electricity networks," Resource and Energy Economics, Elsevier, vol. 19(1-2), pages 109-137, March.
  2. Chao, Hung-Po & Peck, Stephen, 1996. "A Market Mechanism for Electric Power Transmission," Journal of Regulatory Economics, Springer, vol. 10(1), pages 25-59, July.
  3. Severin Borenstein & James B. Bushnell & Frank A. Wolak, 2002. "Measuring Market Inefficiencies in California's Restructured Wholesale Electricity Market," American Economic Review, American Economic Association, vol. 92(5), pages 1376-1405, December.
  4. Bushnell, James, 2005. "Looking for Trouble: Competition Policy in the U.S. Electricity Industry," Staff General Research Papers Archive 13140, Iowa State University, Department of Economics.
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Cited by:

  1. Thure Traber & Claudia Kemfert, 2012. "German Nuclear Phase-out Policy: Effects on European Electricity Wholesale Prices, Emission Prices, Conventional Power Plant Investments and Eletricity Trade," Discussion Papers of DIW Berlin 1219, DIW Berlin, German Institute for Economic Research.

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