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Cournot equilibria in two-settlement electricity markets with system contingencies

Author

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  • Jian Yao
  • Shmuel S. Oren
  • Ilan Adler

Abstract

We study Nash equilibrium in two-settlement competitive electricity markets with horizontal market power, flow congestion, demand uncertainties and probabilistic system contingencies. The equilibrium is formulated as a stochastic Equilibrium Problem with Equilibrium Constraints (EPEC) in which each firm solves a stochastic Mathematical Programme with Equilibrium Constraints (MPEC). We assume a no-arbitrage relationship between the forward prices and the spot prices. We find that, with two settlements, the generation firms have incentives to commit forward contracts, which increase social surplus and decrease spot energy prices. Furthermore, these effects are amplified when the markets become less concentrated.

Suggested Citation

  • Jian Yao & Shmuel S. Oren & Ilan Adler, 2007. "Cournot equilibria in two-settlement electricity markets with system contingencies," International Journal of Critical Infrastructures, Inderscience Enterprises Ltd, vol. 3(1/2), pages 142-160.
    • Handle: RePEc:ids:ijcist:v:3:y:2007:i:1/2:p:142-160
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    Citations

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    Cited by:

    1. Miguel Vazquez, 2012. "Analysis of the strategic use of forward contracting in electricity markets," RSCAS Working Papers 2012/13, European University Institute.
    2. Munhoz, Fernando Colli, 2021. "Two-settlement system for the Brazilian electricity market," Energy Policy, Elsevier, vol. 152(C).
    3. Dane A. Schiro & Benjamin F. Hobbs & Jong-Shi Pang, 2016. "Perfectly competitive capacity expansion games with risk-averse participants," Computational Optimization and Applications, Springer, vol. 65(2), pages 511-539, November.

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