Behavioral model using Conjectural Variation in power markets considering the effect of contracts

Abstract

Abstract-Introduction of competition in the generation sector has resulted in an interest for modeling the behavior of competitors for all strategic decisions. The behavioral model using Conjectural Variation (CV) will play a key role in the prediction of behavior of all constituents of power market. The conjecture of a firm is defined as its belief or expectation about how its opponents will react to a change in its output. Since there is an absence of any confidential information, the CV based model has to be based on past data. In this paper, the following applications are reported. (a) An optimal bidding strategy, based on CV, to obtain the coefficients of affine supply function. For this, the elasticity of demand is also considered. The method, as applied to a practical system, is illustrated. (b) The effect of contracts on a pool based spot market. In this analysis, we study the effect of contracts on bids of generating companies, and the market power exercised by them. Simulation results for different sample systems are presented, which substantiate the analytic conclusions.Index Terms-Conjectural variation, forward market, market power, optimal bidding, supply function equilibrium.

Application of a conjectural variations model to analyze the competitive behavior in the Iberian electricity market

“…The authors estimated the CV of firms in the Spanish electricity market and use a statistical time-series model to forecast the CV of each firm and then simulate the market. Another application to the Australian National Electricity Market, Sakri, Kiran and Khaparde [9] used a CV model to obtain the optimal dispatch of firms in the presence of contracts and to study the effects of them on the market power. In a context of market integration Sousa [10] studied the impact of the implementation of the future Iberian Electricity Market (IBELM) for different values of a CV parameter which represented different levels of competitiveness of the market.…”