Assessing the market power due to the network constraints in competitive electricity markets

• Published in: Electric power systems research Vol. 76; no. 11; pp. 953 - 961
• Main Authors: Bompard, E., Ma, Y.C., Napoli, R., Jiang, C.W.
• Format: Journal Article
• Language: English
• Published: Amsterdam Elsevier B.V 01.07.2006; Elsevier
• Subjects: Applied sciences; Congestion; Electrical engineering. Electrical power engineering; Electrical power engineering; Exact sciences and technology; Market power; Nash equilibrium; Operation. Load control. Reliability; Power networks and lines; Supply function equilibrium; Market power; Nash equilibrium; Congestion; Supply function equilibrium; Waveform; Sensitivity analysis; Power system economics; Game theory; Experimental result; Transmission line; Theoretical model; Analysis method; Analytical method; Oligopolistic market; Numerical simulation; Power markets; Open market; Market equilibrium; Traffic congestion
• ISSN: 0378-7796; 1873-2046
• DOI: 10.1016/j.epsr.2005.12.004

The physical and operational constraints of the network pose very specific problems to market power analysis in the oligopolistic electricity markets. This paper presents a direct analytical approach to find the market equilibrium based on a supply function game model. The model is exploited to undertake a sensitivity analysis of the producer surplus with reference to the line flow limits under a DC power flow model for network representation. Two different kinds of indices, that can capture the market power arising under network constraints, are proposed. The first set of indices is the location privilege (LP), that measure the effect of the generators positioning in the grid on their surplus under perfect competition. The second set is for the network market power (NMP) indices that take into account the strategic behaviors of the producers that may take advantage of the congestion of the transmission lines. The indices allow for a ranking of the lines in terms of the market power they can induce and, in this respect, they may help the market regulator to focus on the network weakness in terms of the possible market outcomes under the market power behaviors from the supply side. The application of the proposed indices is illustrated with reference to the IEEE 30-bus test system.