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A Dynamic Oligopolistic Electricity Market with Interdependent Market Segments

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  • Pierre-Olivier Pineau
  • Hasina Rasata
  • Georges Zaccour

Abstract

We propose a deterministic, discrete-time, finite-horizon oligopoly model to investigate investment and production equilibrium strategies, in a setting where demand evolves over time and the two market-segment loads (peak- and baseload) are interdependent. The players (generators) compete a la Cournot, open-loop Nash equilibria are computed and numerical results are discussed. The model is calibrated with data from Ontario, Canada. We assess the impact on equilibrium strategies of a generation sector with more market power than what is actually the case. We also find a slight difference in the investment sequence when interdependent demand segments are considered. Finally, we analyze the impact of increasing demand elasticities over time, and varying the financial values of the production capacities that remain at the end of the planning horizon. We believe that such a tool is valuable for professionals and scholars interested in the dynamics of production capacity mix (portfolio of technologies) in the electricity sector. It is also of paramount importance for public decision makers who have to simultaneously deal with environmental issues and with price control, both of which are politically sensitive. doi: 10.5547/ISSN0195-6574-EJ-Vol32-No4-8

Suggested Citation

  • Pierre-Olivier Pineau & Hasina Rasata & Georges Zaccour, 2011. "A Dynamic Oligopolistic Electricity Market with Interdependent Market Segments," The Energy Journal, , vol. 32(4), pages 183-218, October.
    • Handle: RePEc:sae:enejou:v:32:y:2011:i:4:p:183-218
    DOI: 10.5547/ISSN0195-6574-EJ-Vol32-No4-9
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    References listed on IDEAS

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    1. Aigner, D J & Newman, J & Tishler, A, 1994. "The Response of Small and Medium-Size Business Customers to Time-of-Use (TOU) Electricity Rates in Israel," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 9(3), pages 283-304, July-Sept.
    2. Mountain, Dean C. & Lawson, Evelyn L., 1995. "Some initial evidence of Canadian responsiveness to time-of-use electricity rates: Detailed daily and monthly analysis," Resource and Energy Economics, Elsevier, vol. 17(2), pages 189-212, August.
    3. Pierre-Olivier Pineau & Georges Zaccour, 2007. "An Oligopolistic Electricity Market Model with Interdependent Segments," The Energy Journal, International Association for Energy Economics, vol. 0(Number 3), pages 165-186.
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