MODELLING PROFIT MAXIMISATION IN DEREGULATED POWER MARKETS BY EQUILIBRIUM CONSTRAINTS

This paper presents a novel conceptual approach to model the new deregulated power markets. It combines powerful traditional tools related to the detailed system operation with techniques for modelling the economic market equilibria. The proposed approach models the competitive behaviour of the electric firms by incorporating a set of constraints, namely the Equilibrium Constraints, into a traditional production cost model. These constraints reproduce the first order optimality conditions of the strategic companies. Thus, the approach achieves a profit maximisation objective while retaining the system operation details. This model has been implemented in GAMS. An application to the large-scale Spanish electric power system is also presented.