A Simulation Analysis of Electricity Markets: Cournot oligopoly and new entry of large-scale generators in the extra-high voltage commercial electricity market (Japanese)

Makoto Tanaka and Yoshitsugu Kanemoto

Discussion Papers (Japanese) from Research Institute of Economy, Trade and Industry (RIETI)

Abstract: In studies on the liberalization of Japanese electricity markets, simulations targeting whole areas of liberalization have been conducted. However, new entries have been very rare except in the area of commercial demand for extra-high voltage supply. In this paper we conduct a simulation analysis of commercial demand for extra-high voltage supply where actual entries by PPSs have been made. Based on the assumption of the operation of new large-scale electric power plants by PPSs that are planned for the future, we analyze the market impact of increased PPS supply capacity. In previous studies, power prices in Cournot equilibria tend to be very high. In our research we realistically limit the field of competition to extra-high voltage commercial power, and thus the equilibrium price is at a more realistic level. In a base case in which there is absolutely no entry by PPSs, the price is ¥10.08/kWh in the western market and ¥11.26/kWh in the eastern market in terms of one-hour daytime transactions during the summer season. Transmission congestion occurs only in the connecting grid between east and west, and electricity flows from west to east at full transmission capacity. Next, in the case of an assumption that electricity supplied by PPSs is 500 MW in the western market and 1100 MW in the eastern market, the resulting price would be ¥9.99/kWh in the western market and ¥10.51/kWh in the eastern one. Compared with the base case, the prices are lower by ¥0.09 in the western market and by ¥0.75 in the eastern one. Furthermore, if we consider a case in which the start of operation of new large-scale power plants by PPSs results in an increase in PPS supply volume of 550 MW in the western market and 800 MW in the eastern one, the resulting price would be ¥9.89/kWh in the western market and ¥9.99/kWh in the eastern market. Compared with the base case, prices are ¥0.19 lower in the western market and ¥1.27 lower in the eastern market.

Pages: 29 pages
Date: 2008-12
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Persistent link: https://EconPapers.repec.org/RePEc:eti:rdpsjp:08064

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