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Improved Transmission Representations in Oligopolistic Market Models: Quadratic Losses, Phase Shifters, and DC Lines

Practical models of competition among power generators who possess market power have generally had to use simplified models of transmission costs and constraints in order to be tractable. In particular, the linearized DC load flow model has been popular in complementarity and other types of oligopoly models. In this paper, we show how such models can be generalized to include quadratic losses, controllable DC lines, and phase shifting transformers. These generalizations preserve convexity of the feasible region, a property that facilitates computation and proof of solution uniqueness and existence. Piecewise and successive linearization formulations are also provided that allow consideration of nonlinear losses in models that require linear constraints. A simple six-bus example illustrates the application of these generalizations. In that example, the impact of losses on prices is much greater under strategic behavior than under competition. Large-scale applications of these approaches to markets in western North America and the European Union illustrate how inclusion of nonlinear losses and controllable DC lines can affect estimates of prices, flows, and economic efficiency indices resulting from oligopoly models.

Electricity market liberalisation in Europe Who's got the power?

The European electricity market is in the middle of a transformation from monopolistic state-owned production and distribution to privatized markets, with various competing firms. The speed of privatization differs widely across Europe from full trade of electricity at the wholesale market in Scandinavian countries, to partial trade on the wholesale market in The Netherlands and Germany, and no trade on the wholesale market in France and Belgium. Hence, the market and its rules are no longer fixed, and the electricity market is in the middle of a dynamic and complex process of change. This report discusses whether the liberalization process can result in more efficient electricity production in Europe. In addition, the environmental impacts of the liberalization process are studied. Efficiency of electricity production is analyzed with a static computational game theoretic model, which compares strategic options of and interactions among energy suppliers. This model is calibrated to the European electricity market in eight countries, namely Belgium, Denmark, Finland, France, Germany, The Netherlands, Norway, and Sweden. In a liberalized market, large firms are most likely to behave strategically and exercise market power in order to maximize profits. As a result, wholesale prices might increase, partially or fully off-setting the purpose of liberalization, namely to decrease wholesale prices. Also, a potential market leader may emerge, who by anticipating on the reaction of followers, could acquire higher profits by increasing production and market share. Finally, firms can also acquire passive ownership in other firms. Passive cross-border ownership can increase a firms market power and profits, resulting in even higher wholesale prices. The environmental impacts of different scenarios of producer behavior are ambiguous. Under full competition, greenhouse gas emissions decline compared to the initial situation, while acidification and smog formation increase. In the case where large firms act strategically, the levels of emission decrease due to higher electricity prices and lower levels of electricity demand. In the case with a potential first-moving market leader, the levels of emission increase substantially. This result, however, depends on the technology mix of the electricity capacity of the market leader.

Improved Transmission Representations in Oligopolistic Market Models

Practical models of competition among power generators who possess market power have had to use simplified models of transmission costs and constraints in order to be tractable. In particular, the linearized DC load flow model has been popular in complementarity and other types of models. In this paper, we show how such models can be generalized to include quadratic losses, controllable DC lines, and phase shifting transformers. These generalizations preserve convexity of the feasible region, a property that facilitates computation and proof of solution uniqueness and existence. Piecewise and successive linearization formulations are all also provided that allow consideration of nonlinear losses in models that require linear constraints. A simple six node example illustrates the application of these generalizations. Large-scale applications of these approaches to markets in PJM, the European Union, and the WSCC will be summarized in the presentation

Participation in the Water Body Irrigation Management in Saline Zone in West Bengal in India

This study analyzes farmers’ participation in irrigation management for small scale irrigation through water bodies in a saline zone in India. Principal Component Analysis shows that key decision variables of farmers are (i) strength of decision making body, (ii) water body quality and maintenance, (iii) water sharing fairness and (iv) water sufficiency. Regression analysis indicates that the farmers’ participation increases with variables like membership of water users’ association, proximity to the market, possession of agricultural assets, hired labor in the family, higher shares of aman paddy and vegetable crops, existence of fish cultivation. Four non-cooperative participation games were estimated and the results show that sharing of water body irrigation benefits among the farmers is not harmonious.

Greenhouse Gas Emissions Trading in the Electricity Sector: Model Formulation and Case Studies

Models formulated as complementarity problems have been applied previously to assess the potential for market power and costs of environmental regulation in transmission-constrained electricity markets. One emerging use of these models is to study the impacts of cap-and-trade (C&T) policies on electricity markets. In this chapter, we first summarize the theoretical background on the choice of environmental instruments to regulate emissions from the power sector. The chapter then presents a mathematical formulation of a power market that incorporates a carbon dioxide C&T program. We illustrate the capability of the model by presenting the results from two analyses. The first analysis examines the impact of the European Union Emissions Trading Scheme (EU ETS) on the northwestern European electricity market. The second study investigates the energy and emissions implications of Maryland’s decision to join the Regional Greenhouse Gas Initiative (RGGI) by nesting a regional power sector model within a national model. In both cases, the larger firms in the electric market are modeled as Cournot oligopolists who pursue a quantity strategy while at the same time they act competitively in the C&T programs and transmission markets. We demonstrate how complementarity-based power market models can be easily modified to incorporate details of alternative policy designs.