Modeling and Computing Two-Settlement Oligopolistic Equilibrium in a Congested Electricity Network

Jian Yao (), Ilan Adler () and Shmuel S. Oren ()
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Jian Yao: Department of Industrial Engineering and Operations Research, University of California, Berkeley, California 94720
Ilan Adler: Department of Industrial Engineering and Operations Research, University of California, Berkeley, California 94720
Shmuel S. Oren: Department of Industrial Engineering and Operations Research, University of California, Berkeley, California 94720

Operations Research, 2008, vol. 56, issue 1, 34-47

Abstract: A model of two-settlement electricity markets is introduced, which accounts for flow congestion, demand uncertainty, system contingencies, and market power. We formulate the subgame perfect Nash equilibrium for this model as an equilibrium problem with equilibrium constraints (EPEC), in which each firm solves a mathematical program with equilibrium constraints (MPEC). The model assumes linear demand functions, quadratic generation cost functions, and a lossless DC network, resulting in equilibrium constraints as a parametric linear complementarity problem (LCP). We introduce an iterative procedure for solving this EPEC through repeated application of an MPEC algorithm. This MPEC algorithm is based on solving quadratic programming subproblems and on parametric LCP pivoting. Numerical examples demonstrate the effectiveness of the MPEC and EPEC algorithms and the tractability of the model for realistic-size power systems.

Keywords: noncooperative games; Cournot equilibrium; electricity market; two settlements; programming; mathematical program with equilibrium constraints; equilibrium problem with equilibrium constraints; linear complementarity problem (search for similar items in EconPapers)
Date: 2008
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Citations: View citations in EconPapers (49)

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