Real-Time Versus Day-Ahead Market Power in a Hydro-Based Electricity Market

Abstract

We analyse in a theoretical framework the link between real-time and day-ahead market performance in a hydro-based and imperfectly competitive wholesale electricity market.Theoretical predictions of the model are tested on data from the Nordic power exchange, Nord Pool Spot (NPS). We reject the hypothesis that prices at NPS were at their competitive levels throughout the period under examination. The empirical approach uses equilibrium prices and quantities and does not rely on bid data nor on estimation of demand or marginal cost functions.

Strategic storage use in a hydro-thermal power system with carbon constraints

“…Increased VRES penetration and stringent cuts to CO 2 emissions could provide more leverage to flexible thermal and hydro producers to exert market power. Such incentives may be enhanced particularly in power systems that are endowed with diversified power companies with a portfolio of flexible assets or hydro reservoirs as found empirically to be the case in the Iberian and Nordic regions (Ito and Reguant, 2016;Tangerås and Mauritzen, 2018). It is plausible for similar distortions to arise from the ambitious sustainability targets posited by RGGI due to the interconnection with Québec's large hydro reservoirs.…”

“…a 50% increase from 2019 to 2024 (IEA, 2019), power systems will need more flexibility to integrate them (Lund et al, 2015). Large-scale hydropower with reservoirs provides flexibility toward this end (Hirth, 2016), but such a storage option in markets with strategic players can create new opportunities for manipulating market prices (Tangerås and Mauritzen, 2018). As there are several such hydro-thermal power systems with carbon constraints worldwide, e.g., California, Italy, Manitoba-Minnesota, New York-Québec, and Nord Pool, our objective is to understand strategic behavior in these contexts by using New York-Québec as our case study in order to inform future energy policy.…”

“…Given the recent empirical evidence for market power in electricity markets due to either hydro storage (Tangerås and Mauritzen, 2018) or arbitrage potential more generally for an integrated producer (Ito and Reguant, 2016), a careful assessment of the role of hydro reservoirs in enabling spatial and temporal arbitrage is warranted. This paper specifically investigates strategic behavior in a hydro-thermal system with reservoirs in the presence of VRES output and a C&T constraint.…”

Competition for Flexible Distribution Resources in a 'Smart' Electricity Distribution Network

“…The modeling framework in this paper bears resemblance to the classical Hotelling model of resource extraction which considers the problem of how much of a …nite resource to extract today and how much to save for the future. Under imperfect competition, the equilibrium in the Hotelling model is found at the point at which the marginal revenue is equalized across periods, barring any production constraints; see Tangerås and Mauritzen (2018) and the references therein. The present paper extends the Hotelling analysis by considering and comparing di¤erent market structures such as regulated monopoly, a mixed market structure and vertical integration between retail and production.…”