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Congestion management games in electricity markets

Author

Listed:
  • Ehrhart, Karl-Martin
  • Eicke, Anselm
  • Hirth, Lion
  • Ocker, Fabian
  • Ott, Marion
  • Schlecht, Ingmar
  • Wang, Runxi

Abstract

This paper proposes a game-theoretic model to analyze the strategic behavior of inc-dec gaming in market-based congestion management (redispatch). We extend existing models by considering incomplete information about competitors' costs and a finite set of providers. We find that inc-dec gaming is also a rational behavior in markets with high competition and with uncertainty about network constraints. Such behavior already occurs in our setup of two regions. Comparing market-based redispatch with three theoretical benchmarks highlights a lower efficiency level of market-based redispatch and inflated redispatch payments. Finally, we study seven variations of our basic model to assess whether different market fundamentals or market design changes mitigate incdec gaming. None of these variations eliminate inc-dec gaming entirely.

Suggested Citation

  • Ehrhart, Karl-Martin & Eicke, Anselm & Hirth, Lion & Ocker, Fabian & Ott, Marion & Schlecht, Ingmar & Wang, Runxi, 2025. "Congestion management games in electricity markets," ZEW Discussion Papers 25-044, ZEW - Leibniz Centre for European Economic Research.
  • Handle: RePEc:zbw:zewdip:327112
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    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy

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