Determining the Interruptible Load with Strategic Behavior in a Competitive Electricity Market

Tae Hyun Yoo, Hyeongon Park, Jae-Kun Lyu and Jong-Keun Park
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Tae Hyun Yoo: School of Electrical Engineering & Computer Science, Seoul National University, Gwanak-ro 599, Gwanak-gu, Seoul 151-744, Korea
Hyeongon Park: School of Electrical Engineering & Computer Science, Seoul National University, Gwanak-ro 599, Gwanak-gu, Seoul 151-744, Korea
Jae-Kun Lyu: School of Electrical Engineering & Computer Science, Seoul National University, Gwanak-ro 599, Gwanak-gu, Seoul 151-744, Korea
Jong-Keun Park: School of Electrical Engineering & Computer Science, Seoul National University, Gwanak-ro 599, Gwanak-gu, Seoul 151-744, Korea

Energies, 2014, vol. 8, issue 1, 1-21

Abstract: In a deregulated market, independent system operators meet power balance based on supply and demand bids to maximize social welfare. Since electricity markets are typically oligopolies, players with market power may withhold capacity to maximize profit. Such exercise of market power can lead to various problems, including increased electricity prices, and hence lower social welfare. Here we propose an approach to maximize social welfare and prevent the exercising of market power by means of interruptible loads in a competitive market environment. Our approach enables management of the market power by analyzing the benefit to the companies of capacity withdrawal and scheduling resources with interruptible loads. Our formulation shows that we can prevent power companies and demand-resource owners from exercising market powers. The oligopolistic conditions are described using the Cournot model to reflect the capacity withdrawal in electricity markets. The numerical results confirm the effectiveness of proposed method, via a comparison of perfect competition and oligopoly scenarios. Our approach provides reductions in market-clearing prices, increases in social welfare, and more equal distribution of surpluses between players.

Keywords: electricity market; demand response; interruptible and curtailable load; market efficiency; market power; social welfare maximization; Cournot equilibrium (search for similar items in EconPapers)
JEL-codes: Q Q0 Q4 Q40 Q41 Q42 Q43 Q47 Q48 Q49 (search for similar items in EconPapers)
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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