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Congestion management games in electricity markets

Author

Listed:
  • Ehrhart, Karl-Martin
  • Eicke, Anselm
  • Hirth, Lion
  • Ocker, Fabian
  • Ott, Marion
  • Schlecht, Ingmar
  • Wang, Runxi

Abstract

This paper proposes a game-theoretic model to analyze the strategic behavior of inc-dec gaming in market-based congestion management (redispatch). We extend existing models by considering incomplete information about competitors' costs and a finite set of providers. We find that these extensions do not dissolve inc-dec gaming, which already occurs in our setup of two regions. We also benchmark market-based redispatch against grid investment, cost-based redispatch, and the Vickrey-Clarke-Groves mechanism. The comparison highlights a significant inefficiency of market-based redispatch and inflated redispatch payments. Finally, we study seven variations of our basic model to assess whether different market fundamentals or market design changes mitigate inc-dec gaming. None of these variations eliminate inc-dec gaming entirely.

Suggested Citation

  • Ehrhart, Karl-Martin & Eicke, Anselm & Hirth, Lion & Ocker, Fabian & Ott, Marion & Schlecht, Ingmar & Wang, Runxi, 2022. "Congestion management games in electricity markets," ZEW Discussion Papers 22-060, ZEW - Leibniz Centre for European Economic Research.
    • Handle: RePEc:zbw:zewdip:22060
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    File URL: https://www.econstor.eu/bitstream/10419/266651/1/1826833919.pdf
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    References listed on IDEAS

    as
    1. Sarfati, M. & Hesamzadeh, M-R. & Holmberg, P., 2019. "Production efficiency of nodal and zonal pricing in imperfectly competitive electricity markets," Cambridge Working Papers in Economics 1919, Faculty of Economics, University of Cambridge.
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    Cited by:

    1. Bucksteeg, Michael & Voswinkel, Simon & Blumberg, Gerald, 2023. "Improving flow-based market coupling by integrating redispatch potential - Evidence from a large-scale model," EconStor Preprints 270878, ZBW - Leibniz Information Centre for Economics.
    2. Bucksteeg, Michael & Voswinkel, Simon & Blumberg, Gerald, 2024. "Improving flow-based market coupling by integrating redispatch potential―Evidence from a large-scale model," Energy Policy, Elsevier, vol. 188(C).

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    More about this item

    Keywords

    Energy market; Game theory; Auctions/bidding; Congestion management; Inc-dec gaming;
    All these keywords.

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy

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