Modeling the Impact of Market Interventions on the Strategic Evolution of Electricity Markets

Derek W. Bunn () and Fernando S. Oliveira ()
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Derek W. Bunn: Management Science and Operations, London Business School, Regent's Park, NW1 4SA, London, United Kingdom
Fernando S. Oliveira: Operational Management Department, ESSEC Business School, 95021 Cergy-Pontoise, France

Operations Research, 2008, vol. 56, issue 5, 1116-1130

Abstract: This paper presents a large-scale computationally intensive model for understanding the dynamic strategic evolution of electricity-generating asset portfolios in response to various market interventions, and the consequent longer-term effects of such changes on market structure and prices. We formulate a multistage model involving a Cournot representation of the wholesale electricity market, the performance of which then determines plant trading between players and the coevolution of market structure. An algorithm to model this game is presented. We apply this model to the full England and Wales system, as it was in 2000, and simulate the strategic responses to divestiture, capacity targets, and the two market mechanism variants of pool and bilateral market clearing.

Keywords: games/group decisions; noncooperative; government; energy policies; regulations; industries; electricity (search for similar items in EconPapers)
Date: 2008
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Citations: View citations in EconPapers (15)

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Persistent link: https://EconPapers.repec.org/RePEc:inm:oropre:v:56:y:2008:i:5:p:1116-1130

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