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Dynamic LMP Response Under Alternative Price-Cap and Price-Sensitive Demand Scenarios

Author

Listed:
  • Li, Hongyan
  • Sun, Junjie
  • Tesfatsion, Leigh S.

Abstract

This study investigates the complicated nonlinear effects of demand-bid price sensitivity and supply-offer price caps on Locational Marginal Prices (LMPs) for bulk electric power when profit-seeking generators can learn over time how to strategize their supply offers. Systematic computational experiments are conducted using AMES, an open-source agent-based test bed developed by the authors. AMES models a restructured wholesale power market operating through time over an AC transmission grid subject to line constraints, generation capacity constraints, and strategic trader behaviors. Related work can be accessed at: http://www2.econ.iastate.edu/tesfatsi/AMESMarketHome.htm

Suggested Citation

  • Li, Hongyan & Sun, Junjie & Tesfatsion, Leigh S., 2008. "Dynamic LMP Response Under Alternative Price-Cap and Price-Sensitive Demand Scenarios," Staff General Research Papers Archive 12975, Iowa State University, Department of Economics.
    • Handle: RePEc:isu:genres:12975
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    Cited by:

    1. Li, Hongyan & Tesfatsion, Leigh, 2012. "Co-learning patterns as emergent market phenomena: An electricity market illustration," Journal of Economic Behavior & Organization, Elsevier, vol. 82(2), pages 395-419.
    2. Jisong Zhu & Zhaoxia Jing & Tianyao Ji & Nauman Ali Larik, 2020. "Energy–Economy Coupled Simulation Approach and Simulator Based on Invididual-Based Model," Energies, MDPI, vol. 13(11), pages 1-18, June.
    3. Somani, Abhishek, 2012. "Financial risk management and market performance in restructured electric power markets: Theoretical and agent-based test bed studies," ISU General Staff Papers 201201010800003479, Iowa State University, Department of Economics.
    4. Li, Hongyan & Sun, Junjie & Tesfatsion, Leigh S., 2009. "Separation and Volatility of Locational Marginal Prices in Restructured Wholesale Power Markets," Staff General Research Papers Archive 13075, Iowa State University, Department of Economics.

    More about this item

    Keywords

    locational marginal prices; market power; Agent-based test bed; AMES; wholesale electric power; demand response; price caps;
    All these keywords.

    JEL classification:

    • C6 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling
    • C7 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory
    • D4 - Microeconomics - - Market Structure, Pricing, and Design
    • D6 - Microeconomics - - Welfare Economics
    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
    • L2 - Industrial Organization - - Firm Objectives, Organization, and Behavior
    • L3 - Industrial Organization - - Nonprofit Organizations and Public Enterprise
    • L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities
    • Q4 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy

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