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A Mixed Complementarity Model of Hydrothermal Electricity Competition in the Western United States

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  • James Bushnell

    (University of California Energy Institute, 2539 Channing Way, Berkeley, California 94720)

Abstract

This paper presents a modeling framework for analyzing competition between multiple firms that each possess a mixture of hydroelectric and thermal generation resources. Based upon the concept of a Cournot oligopoly with a competitive fringe, the model characterizes the Cournot equilibrium conditions of a multiperiod hydrothermal scheduling problem. Using data from the western United States electricity market, this framework is implemented as a mixed linear complementarity model. The results show that some firms may find it profitable to allocate considerably more hydro production to off-peak periods then they would under perfect competition. This strategy is a marked contrast to the optimal hydroschedules that would arise if no firms were acting strategically. These results highlight the need to explicitly consider profit-maximizing behavior when examining the impact of regulatory and environmental policies on electricity market outcomes.

Suggested Citation

  • James Bushnell, 2003. "A Mixed Complementarity Model of Hydrothermal Electricity Competition in the Western United States," Operations Research, INFORMS, vol. 51(1), pages 80-93, February.
    • Handle: RePEc:inm:oropre:v:51:y:2003:i:1:p:80-93
    DOI: 10.1287/opre.51.1.80.12800
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    References listed on IDEAS

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