Strategic bidding and rebidding in electricity markets

Adam Clements, Stan Hurn and Z. Li

Energy Economics, 2016, vol. 59, issue C, 24-36

Abstract: Successful deregulation in electricity markets depends crucially on the ability of market regulation to promote and maintain free competition. There are, however, important physical characteristics in electricity markets, such as the constraints imposed by the physical transmission infrastructure, that have the potential to undermine competition and provide opportunities for market participants to exploit temporary positions of market power. In this paper, the regional market of Queensland, Australia is analysed. It is found that strategic behaviour by generators exists and is closely related to the occurrence of the kind of extreme price events that characterise many deregulated electricity markets. In addition, rebidding behaviour by base-load generators immediately after extreme price events is shown to have negative impacts on the operation of the market. The key message is that promotion of competition in electricity markets can have undesirable consequences unless the regulatory policy is carefully designed to counter strategic behaviour by market participants.

Keywords: Electricity market; Transmission constraints; Synchronisation time; Ramp-up rate; Strategic bidding; Rebidding; Counter-price flow (search for similar items in EconPapers)
JEL-codes: Q41 Q48 (search for similar items in EconPapers)
Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (22)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:eneeco:v:59:y:2016:i:c:p:24-36

DOI: 10.1016/j.eneco.2016.07.011

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