Open versus closed loop capacity equilibria in electricity markets under perfect and oligopolistic competition

Wogrin, Sonja; Hobbs, Benjamin F.; Ralph, Daniel; Centeno, Efraim; Barquı́n, Julián

doi:10.1007/s10107-013-0696-2

Cited by 79 publications

(34 citation statements)

References 20 publications

Supporting

Mentioning

Contrasting

Order By: Relevance

“…The existing literature on the subject, in particular the above mentioned Murphy and Smeers (2005) as well as Wogrin et al (2013b), provides general properties of closed-loop and open-loop models and conditions for diverging and non-diverging results between the two models, assuming simplified settings (e.g., ignoring existing capacities). We conjecture that in a spatial application with non-generic data and existing capacities available to the players, equilibria are likely to deviate between the two modeling approaches, which is confirmed by our application to the metallurgical coal market (see Sections 4 and 5).…”

Section: Discussion Of the Models And Equilibrium Conceptsmentioning

confidence: 99%

Modeling strategic investment decisions in spatial markets

Lorenczik

Malischek

Trüby

2017

European Journal of Operational Research

View full text Add to dashboard Cite

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in AbstractMarkets for natural resources and commodities are often oligopolistic. In these markets, production capacities are key for strategic interaction between the oligopolists. We analyze how different market structures influence oligopolistic capacity investments and thereby affect supply, prices and rents in spatial natural resource markets using mathematical programing models. The models comprise an investment period and a supply period in which players compete in quantities. We compare three models, one perfect competition and two Cournot models, in which the product is either traded through long-term contracts or on spot markets in the supply period. Tractability and practicality of the approach are demonstrated in an application to the international metallurgical coal market. Results may vary substantially between the different models. The metallurgical coal market has recently made progress in moving away from long-term contracts and more towards spot market-based trade. Based on our results, we conclude that this regime switch is likely to raise consumer rents but lower producer rents. The total welfare differs only negligibly.

show abstract

Section: Discussion Of the Models And Equilibrium Conceptsmentioning

confidence: 99%

Modeling strategic investment decisions in spatial markets

Lorenczik

Malischek

Trüby

2017

European Journal of Operational Research

View full text Add to dashboard Cite

show abstract

“…Harker, 1991) or games with individual joint constraints (Nabetani et al, 2011), as well as equilibrium problems in discrete rather than binary variables. Furthermore, more general non-cooperative games can be solved in this framework, such as games based on conjectural variations (Wogrin et al, 2013). Extending the approach to stochastic applications is also straightforward.…”

Section: Discussionmentioning

confidence: 99%

“…Electricity markets are the real-world application of binary games which have received the most attention in the mathematical optimization literature (O'Neill et al, 2013;Liu and Hobbs, 2013;Wogrin et al, 2013;Liu and Ferris, 2013;Philpott et al, 2013;Bjørndal and Jörnsten, 2008;Hu and Ralph, 2007;Philpott and Schultz, 2006;O'Neill et al, 2005). A challenging problem arises from the on-off decision of power plants, which usually incur substantial start-up or shut-down costs and, if operational, face minimum-generation constraints.…”

Section: Introductionmentioning

confidence: 99%

An exact solution method for binary equilibrium problems with compensation and the power market uplift problem

Huppmann

Siddiqui

2018

European Journal of Operational Research

View full text Add to dashboard Cite

We propose a novel method to find Nash equilibria in games with binary decision variables by including compensation payments and incentive-compatibility constraints from non-cooperative game theory directly into an optimization framework in lieu of using first order conditions of a linearization, or relaxation of integrality conditions. The reformulation offers a new approach to obtain and interpret dual variables to binary constraints using the benefit or loss from deviation rather than marginal relaxations. The method endogenizes the trade-off between overall (societal) efficiency and compensation payments necessary to align incentives of individual players. We provide existence results and conditions under which this problem can be solved as a mixed-binary linear program.We apply the solution approach to a stylized nodal power-market equilibrium problem with binary on-off decisions. This illustrative example shows that our approach yields an exact solution to the binary Nash game with compensation. We compare different implementations of actual market rules within our model, in particular constraints ensuring non-negative profits (no-loss rule) and restrictions on the compensation payments to non-dispatched generators. We discuss the resulting equilibria in terms of overall welfare, efficiency, and allocational equity.

show abstract

“…Our aim is to understand the differences in investments that are made when the flexibility of generating plant is accounted for. While our model would pertain to a perfectly competitive electricity market, other studies investigate generation investments under oligopolies, but do not incorporate intermittency (see for example [19]). Although the central planning approach to investment in electricity plant is becoming increasingly rare in market economies, regulators and analysts still use optimization models as benchmarks of what investments might emerge from a competitive market.…”

Section: Introductionmentioning

confidence: 99%

Investment and generation optimization in electricity systems with intermittent supply

Wu¹,

Philpott

Zakeri

2016

Energy Syst

View full text Add to dashboard Cite

Increasing levels of renewable power generation require changes in investment models to deal with intermittent supply. We present a Markov decision problem that can be used to model thermal plant operation with intermittent demand, and show how this can be incorporated into a mixed integer programming model for optimally choosing investments. The model is extended to deal with staging investment over long planning horizons.

show abstract

Open versus closed loop capacity equilibria in electricity markets under perfect and oligopolistic competition

Cited by 79 publications

References 20 publications

Modeling strategic investment decisions in spatial markets

Modeling strategic investment decisions in spatial markets

An exact solution method for binary equilibrium problems with compensation and the power market uplift problem

Investment and generation optimization in electricity systems with intermittent supply

Contact Info

Product

Resources

About