The entry and exit game in the electricity markets: A mean-field game approach

René Aïd, Roxana Dumitrescu and Peter Tankov
Additional contact information
René Aïd: LEDa - Laboratoire d'Economie de Dauphine - IRD - Institut de Recherche pour le Développement - Université Paris Dauphine-PSL - PSL - Université Paris Sciences et Lettres - CNRS - Centre National de la Recherche Scientifique
Roxana Dumitrescu: Department of Mathematics [London] - King‘s College London
Peter Tankov: ENSAE - Ecole Nationale de la Statistique et de l'Analyse Economique - Ecole Nationale de la Statistique et de l'Analyse Economique

Post-Print from HAL

Abstract: We develop a model for the industry dynamics in the electricity market, based on mean-field games of optimal stopping. In our model, there are two types of agents: the renewable producers and the conventional producers. The renewable producers choose the optimal moment to build new renewable plants, and the conventional producers choose the optimal moment to exit the market. The agents interact through the market price, determined by matching the aggregate supply of the two types of producers with an exogenous demand function. Using a relaxed formulation of optimal stopping mean-field games, we prove the existence of a Nash equilibrium and the uniqueness of the equilibrium price process. An empirical example, inspired by the UK electricity market is presented. The example shows that while renewable subsidies clearly lead to higher renewable penetration, this may entail a cost to the consumer in terms of higher peakload prices. In order to avoid rising prices, the renewable subsidies must be combined with mechanisms ensuring that sufficient conventional capacity remains in place to meet the energy demand during peak periods.

Keywords: Mean-field games; optimal stopping; renewable energy; electricity markets (search for similar items in EconPapers)
Date: 2021
References: Add references at CitEc
Citations: View citations in EconPapers (10)

Published in Journal of Dynamics and Games, 2021, ⟨10.3934/jdg.2021012⟩

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-03215763

DOI: 10.3934/jdg.2021012

Access Statistics for this paper

More papers in Post-Print from HAL
Bibliographic data for series maintained by CCSD ().