A large oligopoly competition model with an application to the Midwest electricity markets

This paper presents a large spatial gaming model with price caps for the Midwest electricity markets. Price caps are enforced in several deregulated regional electricity markets in the USA, a logical step is to reflect this reality in imperfect competition modeling. Unfortunately, most current gaming models have not included any price cap formulation. This paper is one of the first to address the issue. A transportation formulation is used for representing the spatial nature of an electrical network. An algorithm is proposed to find a Nash equilibrium under the enforcement of price caps based on the Kuhn-Tucker vector optimization theorem. Case studies show the successful application of the model. The conclusion is that, given appropriate price caps, market power impact can be reduced in the short run.

[1]  P. Preckel,et al.  A locational gaming model with CO2 emission tax and limits , 2001 .

[2]  M. M. Morcos,et al.  Induction Motor Behavior under Short Interruptions and Voltage Sags , 2001, IEEE Power Engineering Review.

[3]  J. Pang,et al.  Strategic gaming analysis for electric power systems: an MPEC approach , 2000 .

[4]  T. Morin,et al.  A Stackelberg price leadership model with application to deregulated electricity markets , 2000, 2000 IEEE Power Engineering Society Winter Meeting. Conference Proceedings (Cat. No.00CH37077).

[5]  Benjamin F. Hobbs,et al.  Understanding how market power can arise in network competition: a game theoretic approach , 1999 .

[6]  William W. Hogan,et al.  A Market Power Model with Strategic Interaction in Electricity Networks , 1997 .

[7]  R. Green,et al.  Competition in the British Electricity Spot Market , 1992, Journal of Political Economy.

[8]  Richard Schmalensee,et al.  Estimating Effective Concentration in Deregulated Wholesale Electricity Markets , 1984 .

[9]  Yves Smeers,et al.  Spatial Oligopolistic Electricity Models with Cournot Generators and Regulated Transmission Prices , 1999, Oper. Res..

[10]  Benjamin F. Hobbs,et al.  LCP models of Nash-Cournot competition in bilateral and POOLCO-based power markets , 1999, IEEE Power Engineering Society. 1999 Winter Meeting (Cat. No.99CH36233).

[11]  Dimitri P. Bertsekas,et al.  Nonlinear Programming , 1997 .

[12]  Philip G. Hill,et al.  Power generation , 1927, Journal of the A.I.E.E..