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Determining the Interruptible Load with Strategic Behavior in a Competitive Electricity Market

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  • Tae Hyun Yoo

    (School of Electrical Engineering & Computer Science, Seoul National University, Gwanak-ro 599, Gwanak-gu, Seoul 151-744, Korea)

  • Hyeongon Park

    (School of Electrical Engineering & Computer Science, Seoul National University, Gwanak-ro 599, Gwanak-gu, Seoul 151-744, Korea)

  • Jae-Kun Lyu

    (School of Electrical Engineering & Computer Science, Seoul National University, Gwanak-ro 599, Gwanak-gu, Seoul 151-744, Korea)

  • Jong-Keun Park

    (School of Electrical Engineering & Computer Science, Seoul National University, Gwanak-ro 599, Gwanak-gu, Seoul 151-744, Korea)

Abstract

In a deregulated market, independent system operators meet power balance based on supply and demand bids to maximize social welfare. Since electricity markets are typically oligopolies, players with market power may withhold capacity to maximize profit. Such exercise of market power can lead to various problems, including increased electricity prices, and hence lower social welfare. Here we propose an approach to maximize social welfare and prevent the exercising of market power by means of interruptible loads in a competitive market environment. Our approach enables management of the market power by analyzing the benefit to the companies of capacity withdrawal and scheduling resources with interruptible loads. Our formulation shows that we can prevent power companies and demand-resource owners from exercising market powers. The oligopolistic conditions are described using the Cournot model to reflect the capacity withdrawal in electricity markets. The numerical results confirm the effectiveness of proposed method, via a comparison of perfect competition and oligopoly scenarios. Our approach provides reductions in market-clearing prices, increases in social welfare, and more equal distribution of surpluses between players.

Suggested Citation

  • Tae Hyun Yoo & Hyeongon Park & Jae-Kun Lyu & Jong-Keun Park, 2014. "Determining the Interruptible Load with Strategic Behavior in a Competitive Electricity Market," Energies, MDPI, vol. 8(1), pages 1-21, December.
    • Handle: RePEc:gam:jeners:v:8:y:2014:i:1:p:257-277:d:44140
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    References listed on IDEAS

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    4. Spees, Kathleen & Lave, Lester B., 2007. "Demand Response and Electricity Market Efficiency," The Electricity Journal, Elsevier, vol. 20(3), pages 69-85, April.
    5. Klemperer, Paul D & Meyer, Margaret A, 1989. "Supply Function Equilibria in Oligopoly under Uncertainty," Econometrica, Econometric Society, vol. 57(6), pages 1243-1277, November.
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    Cited by:

    1. Xia Zhou & Wei Li & Mengya Li & Qian Chen & Chaohai Zhang & Jilai Yu, 2016. "Effect of the Coordinative Optimization of Interruptible Loads in Primary Frequency Regulation on Frequency Recovery," Energies, MDPI, vol. 9(3), pages 1-11, March.
    2. Yoo, Tae-Hyun & Ko, Woong & Rhee, Chang-Ho & Park, Jong-Keun, 2017. "The incentive announcement effect of demand response on market power mitigation in the electricity market," Renewable and Sustainable Energy Reviews, Elsevier, vol. 76(C), pages 545-554.

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