Dynamic Competition in Electricity Markets: Hydroelectric and Thermal Generation
We study competition between hydro and thermal electricity generators that face uncertainty over demand and water flows where the hydro generator is constrained by water flows and the thermal generator by capacity. We compute the Feedback equilibrium for the in?nite horizon game and show that there can be strategic withholding of water by the hydro generator. When water inflow is relatively low, however, the hydro generator may use more water than efficient as it faces an inefficiently low shadow price of water in this case. The inefficiency of the market outcome is tempered by the capacity constraints: for a large range of possible thermal production capacities and water flow levels, welfare loss under the duopoly market structure is much less than would occur in the absence of water and capacity constraints.
|Date of creation:||2011|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: (519) 824-4120 ext. 53898
Fax: (519) 763-8497
Web page: https://www.uoguelph.ca/economics/
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Thille, Henry, 2006. "Inventories, market structure, and price volatility," Journal of Economic Dynamics and Control, Elsevier, vol. 30(7), pages 1081-1104, July.
When requesting a correction, please mention this item's handle: RePEc:gue:guelph:2011-04.. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Stephen Kosempel)
If references are entirely missing, you can add them using this form.