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Spatially oligopolistic model with nodal opportunity cost pricing for transmission capacity reservations

Author

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  • SMEERS, Yves

    (Center for Operations Research and Econometrics (CORE), Université catholique de Louvain (UCL), Louvain la Neuve, Belgium)

  • WEI, Jing-Yuan

    (Center for Operations Research and Econometrics (CORE), Université catholique de Louvain (UCL), Louvain la Neuve, Belgium)

Abstract

Two markets co-exist in a unbundled electricity supply industry: the one of the electricity supply and the one of transmission capacity reservations. The first one could be assumed as an oligopoly, and the second one, as a natural monopoly, is regulated. The prices in the first market is determined by an oligopolistic equilibrium. The prices in the second market are set equal to opportunity costs. The strong interaction of the behavior of the two markets requires a new concept of equilibrium. In this equilibrium, the two markets must be simultaneously in their own equilibrium: Nash equilibrium in the first and market-clearing equilibrium in the second. A 3-bus example is presented to show the main result of the model.

Suggested Citation

  • SMEERS, Yves & WEI, Jing-Yuan, 1997. "Spatially oligopolistic model with nodal opportunity cost pricing for transmission capacity reservations," LIDAM Discussion Papers CORE 1997026, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    • Handle: RePEc:cor:louvco:1997026
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    File URL: https://sites.uclouvain.be/core/publications/coredp/coredp1997.html
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    Citations

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    Cited by:

    1. Parisio, Lucia & Bosco, Bruno, 2008. "Electricity prices and cross-border trade: Volume and strategy effects," Energy Economics, Elsevier, vol. 30(4), pages 1760-1775, July.
    2. TANAKA Makoto, 2007. "Oligopolistic Competition in the Japanese Wholesale Electricity Market: A Linear Complementarity Approach," Discussion papers 07023, Research Institute of Economy, Trade and Industry (RIETI).
    3. Guido Pepermans & Bert Willems, 2005. "The Potential Impact of Cross-Ownership in Transmission: an Application to the Belgian Electricity Market," Working Papers of Department of Economics, Leuven ces0503, KU Leuven, Faculty of Economics and Business (FEB), Department of Economics, Leuven.
    4. Daniel A. Benitez, 2004. "On Quantity Competition and Transmission Constraints in Electricity Market," Econometric Society 2004 Latin American Meetings 98, Econometric Society.
    5. Pepermans, Guido & Willems, Bert, 2010. "Cost Recovery in Congested Electricity Networks," Working Papers 2010/22, Hogeschool-Universiteit Brussel, Faculteit Economie en Management.
    6. Robert Wilson, 2008. "Supply Function Equilibrium in a Constrained Transmission System," Operations Research, INFORMS, vol. 56(2), pages 369-382, April.
    7. Gasmi, Farid & Oviedo, Juan Daniel, 2010. "Investment in transport infrastructure, regulation, and gas-gas competition," Energy Economics, Elsevier, vol. 32(3), pages 726-736, May.
    8. Gasmi, Farid & Oviedo, Juan Daniel, 2009. "Investment in Transport Infrastructure, and Gas-Gas Competition," TSE Working Papers 09-121, Toulouse School of Economics (TSE).
    9. Bert Willems & Guido Pepermans, 2003. "Regulating transmission in a spatial oligopoly: a numerical illustration for Belgium," Energy, Transport and Environment Working Papers Series ete0314, KU Leuven, Department of Economics - Research Group Energy, Transport and Environment.
    10. A. Bigano & S. Proost & J. Van Rompuy, 2000. "Alternative Environmental Regulation Schemes for the Belgian Power Generation Sector," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 16(2), pages 121-160, June.
    11. Gijsbert Zwart & Machiel Mulder, 2006. "NATGAS: a model of the European natural gas market," CPB Memorandum 144, CPB Netherlands Bureau for Economic Policy Analysis.

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