A Mixed Complementarity Model of Hydro-Thermal Competition in the Western U.S

James Bushnell

Staff General Research Papers Archive from Iowa State University, Department of Economics

Abstract: This paper presents a modeling framework for analyzing competition between multiple firms that each possess a mixture of hydroelectric and thermal generation resources. Based upon the concept ofa Cournot oligopoly with a competitive fringe, the model characterizes the Cournot equilibrium conditions ofa multiperiod hydrothermal scheduling problem. Using data from the western United States electricity market, this framework is implemented as a mixed linear complementarity model. The results show that some firms may find it profitable to allocate considerably more hydro production to off-peak periods then they would under perfect competition. This strategy is a marked contrast to the optimal hydroschedules that would arise ifno firms were acting strategically. These results highlight the need to explicitly consider profit-maximizing behavior when examining the impact ofre gulatory and environmental policies on electricity market outcomes.

Date: 2003-01-01
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Citations: View citations in EconPapers (23)

Published in Operations Research, January 2003, vol. 51 no. 1

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Persistent link: https://EconPapers.repec.org/RePEc:isu:genres:13144

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