A Unique Competitive Equilibrium on Interdependent Spot Electricity and Reserve Capacity Markets
This paper studies the interdependency of a spot electricity market and a market for incremental reserve capacity in a competitive setting, where a continuum of ﬁrms supplies both markets. It is proved that a simultaneous competitive equilibrium on both markets exists in the stylised model used. It turns out that all market equilibria are characterised essentially by a u-shaped reserve capacity market bidding function and that the set of suppliers declaring reserve capacity constitutes an interval. If the supplier’s marginal cost curve is convex, then a unique equilibrium exists.
|Date of creation:||23 Aug 2011|
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- Anna Creti & Natalia Fabra, 2003. "Capacity Markets for Electricity," Industrial Organization 0309002, EconWPA, revised 26 Nov 2003.
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