An Agent-Based Approach to Modeling Electricity Spot Markets

Abstract

Current approaches used for modeling electricity spot markets are static oligopoly models that provide top-down analyses without considering dynamic interactions among market participants. This thesis presents an alternative model, an agent-based model, and uses it to analyze the markets under various conditions. These markets, in which the participants engage in sealed-bid auctions to sell and/or buy electricity regularly, are viewed as multiagent systems, or as repeated games, played by participants with incomplete information. To represent these market characteristics, the agent-based model is selected, consisting of several power-producing agents with non-uniform portfolios of generating units. These agents employ learning algorithms, including Auer et al.'s, softmax action selection, or Visudhiphan and Ili6's model-based algorithms, in determining bid-supply functions from available information.The simulated outcomes from the agent-based model depend on the choice of non-uniform portfolios and on the learning algorithms that the agents employ. Model verifications against the actual markets are suggested; however, due to a lack of certain confidential information, numerical examples cannot be presented. Nevertheless, the model is used to analyze the effects of market structures and the effect of load-serving entities on the power-producer bidding behavior and market outcomes.This model could provide one of the main tools for regulators, system planners, and market participants to use scenario simulations to investigate market conditions that could lead to high electricity prices. The model could also be used to analyze market factors (such as new market rules) and their effects on market price dynamics and market participants' behaviors, as well as to identify the "best" response action of one participant against the opponents' actions.

Agent-based Simulation of Electricity Markets -A Literature Review-

“…The ongoing development of increasing the scope of agent-based simulation of electricity markets also increases the requirements on the agents acting on these markets since the amount of information and coordination that has to be dealt with increases. A demanding task pointed out among others by Visudhiphan (Visudhiphan, 2003) is the validation of agent-based simulation since the required data on real bidding behaviour and market conditions are not available in most cases.…”

“…; (Batten et al, 2005); Active demand side bidding -e.g. (Richter and Sheblè, 1998); (Bunn and Oliveira,2001); (Visudhiphan, 2003) Increasing complexity Category Source: (own visualisation) However, the development of an agent-based simulation of electricity markets is a demanding task. There are several challenges to the development of agentbased simulations.…”

On the complexity of market power assessment in the electricity spot markets

“…Also strategic behavior such as capacity withholding is not emphasized. This particular issue is extensively analyzed in [8].…”