Strategic forward contracting in electricity markets: modelling and analysis by equilibrium method

Chung, T.S.; Zhang, Shaohua; Wong, Kit Po; Yu, C.W.; Chung, C.Y.

doi:10.1049/ip-gtd:20040069

Cited by 30 publications

(27 citation statements)

References 9 publications

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“…This set-up differs from models by e.g. Allaz and Vila (1993), Newbery (1998b), Green (1999) and Chung et al (2004), where the forward price equals the expected spot price also out of the equilibrium path. I find that their assumption is difficult to motivate game-theoretically and it is unnecessarily restrictive, because it does not simplify the analysis.…”

Section: D(pε)mentioning

confidence: 94%

“…Thus forward trading reduce welfare in the model by Mahenc and Salanié (2004). Elastic forward supply -as in the models by Newbery (1998b), Green (1999), and Chung et al (2004) -introduces an additional mechanism beyond the models by Allaz and Vila (1993) and Mahenc and Salanié (2004), which can be referred to as the indirect strategic effect. When one firm increases its forward sales this will change competitors' forward sales (via the forward price), which in its turn influences how aggressive competitors bid in the spot market.…”

Section: Net Seller Net Buyermentioning

confidence: 99%

“…Previous studies of two-stage supply function competition are limited to producers with constant (Newbery, 1998b) and linear marginal costs (Green, 1999;Chung et al, 2004).…”

Section: Figure 2 Competitors' Response To Increased Forward Sales Cmentioning

confidence: 99%

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Game-Theoretical, Strategic Forward Contracting in the Electricity Market

Holmberg

2008

SSRN Journal

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Forward sales is a credible commitment to aggressive spot market bidding, and it mitigates producers' market power in electricity markets. Still it can be profitable for a producer to make such a commitment if it results in a soft response from competitors in the spot market (strategies are substitutes). The optimal contracting level of a risk-neutral producer is determined by the extent to which strategies are substitutes and the slope of the residual demand in the forward market. Conditions under which strategies are substitutes are identified for a two-stage game with supply function competition and capacity constrained producers.

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Section: D(pε)mentioning

confidence: 94%

Section: Net Seller Net Buyermentioning

confidence: 99%

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Game-Theoretical, Strategic Forward Contracting in the Electricity Market

Holmberg

2008

SSRN Journal

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“…We consider a demand function with the following parameters: r = 45 GWh and s = 0.5 GWh/($/MWh). The cost parameters of the generators are shown in Table V [9]. The results obtained are tabulated in Table VI.…”

Section: ) Algorithmmentioning

confidence: 99%

“…This idea has been extended to include multiple Gencos with affine marginal costs in [9]. In [10], a linear asymmetric SFE model, with transmission constraints, has been proposed to develop bidding strategies considering forward contracts.…”

mentioning

confidence: 99%

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

Sakri

Kiran

Khaparde

2008

2008 IEEE Power and Energy Society General Meeting - Conversion and Delivery of Electrical Energy in the 21st Century

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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.

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Overview of Electricity Market Equilibrium Problems and Market Power Analysis

Zhang

2010

Restructured Electric Power Systems

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Strategic forward contracting in electricity markets: modelling and analysis by equilibrium method

Cited by 30 publications

References 9 publications

Game-Theoretical, Strategic Forward Contracting in the Electricity Market

Game-Theoretical, Strategic Forward Contracting in the Electricity Market

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

Overview of Electricity Market Equilibrium Problems and Market Power Analysis

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