Cournot equilibria in two-settlement electricity markets with system contingencies

Jian Yao, Shmuel S. Oren and Ilan Adler

International Journal of Critical Infrastructures, 2007, vol. 3, issue 1/2, 142-160

Abstract: We study Nash equilibrium in two-settlement competitive electricity markets with horizontal market power, flow congestion, demand uncertainties and probabilistic system contingencies. The equilibrium is formulated as a stochastic Equilibrium Problem with Equilibrium Constraints (EPEC) in which each firm solves a stochastic Mathematical Programme with Equilibrium Constraints (MPEC). We assume a no-arbitrage relationship between the forward prices and the spot prices. We find that, with two settlements, the generation firms have incentives to commit forward contracts, which increase social surplus and decrease spot energy prices. Furthermore, these effects are amplified when the markets become less concentrated.

Keywords: electricity markets; two settlements; Cournot equilibria; equilibrium problems; equilibrium constraints; critical infrastructures; electricity infrastructures; EPNES; efficiency; security. (search for similar items in EconPapers)
Date: 2007
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Citations: View citations in EconPapers (3)

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