Strategic gaming analysis for electric power systems: an MPEC approach

• Published in: IEEE transactions on power systems Vol. 15; no. 2; pp. 638 - 645
• Main Authors: Hobbs, B.F., Metzler, C.B., Pang, J.-S.
• Format: Journal Article
• Language: English
• Published: New York IEEE 01.05.2000; The Institute of Electrical and Electronics Engineers, Inc. (IEEE)
• Subjects: Algorithms; Buses (vehicles); Character generation; Costs; Economic models; Electric power generation; ISO; Load flow; Markets; Mathematical model; Mathematical models; Networks; Operations research; Optimization; Power flow; Power generation; Power generation economics; Power markets; Power system modeling; Pricing; Studies
• ISSN: 0885-8950; 1558-0679
• DOI: 10.1109/59.867153

Transmission constraints and market concentration may prevent power markets from being fully competitive, allowing firms to exercise market power and raise prices above marginal cost. We present a strategic gaming model for analyzing such markets; it represents an oligopolistic market economy consisting of several dominant firms in an electric power network. Each generating firm submits bids to an ISO, choosing its bids to maximize profits subject to anticipated reactions by rival firms. The single-firm model is formulated as a mathematical program with equilibrium constraints (MPEC) with a parameter-dependent spatial price equilibrium problem as the inner problem. Power flows and pricing strategies are constrained by the ISO's linearized DC optimal power flow (OFF) model. A penalty interior point algorithm is used to compute a local optimal solution of the MPEC. Numerical examples based on a 30 bus network are presented, including multi-firm Nash equilibria in which each player solves an MPEC of the single-firm type.