Cournot Equilibrium Considering Unit Outages and Fuel Cost Uncertainty

The Cournot model is a common and reasonable approximation to representing strategic competition in electricity markets. This paper proposes a Nash-Cournot model in which unit outages and fuel cost volatility are both accounted for. The Nash equilibrium quantity of each firm is obtained by maximizing its expected profit given the distribution of fuel costs and the availability of generating units. The Cournot equilibrium problem is formulated as a linear complementarity problem. We give a numerical example to show how the price, equilibrium quantities, and firms' profits are affected when outages and fuel cost volatility are ignored.

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