Uncertainties in risk analysis: Six levels of treatment

Two Cournot models of imperfect competition among electricity producers are formulated as mixed linear complementarity problems (LCPs), and a simple example is presented to illustrate their application. The two models simulate bilateral markets. The models include a congestion pricing scheme for transmission, but other transmission pricing approaches can also be represented in this framework. The two models differ from each other in that one has no arbitrage between nodes of the network, while in the other model, arbitragers erase any noncost based differences in price. The latter bilateral model turns out to be equivalent to a Cournot model of a POOLCO. The models differ from other Cournot market models in that they include both of Kirchhoff's laws via a DC approximation; can include arbitragers; possess unique solutions; and are readily solved by efficient LCP algorithms. The key assumption that permits their formulation as LCPs is that each producer naively assumes that its output will not affect transmission prices.

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Linear Complementarity Models of Nash-Cournot Competition in Bilateral and POOLCO Power Markets

In this paper, we formulate the problem of finding an optimal generation dispatch and transmission topology to meet a specific inflexible load as a mixed integer program. Our model is a mixed-integer linear program because it employs binary variables to represent the state of the equipment and linear relationships to describe the physical system. We find that on the standard 118-bus IEEE test case a savings of 25% in system dispatch cost can be achieved.

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Optimal Transmission Switching

Conjectured supply function (CSF) models of competition among power generators on a linearized DC network are presented. As a detailed survey of the power market modeling literature shows, CSF models differ from previous approaches in that they represent each generation company's (GenCo) conjectures regarding how rival firms will adjust sales in response to price changes. The CSF approach is a more realistic and flexible framework for modeling imperfect competition than other models for three reasons. First, the models include as a special case the Cournot conjecture that rivals will not change production if prices change; thus, the CSF framework is more general. Second, Cournot models cannot be used when price elasticity of demand is zero, but the proposed models can. Third, unlike supply function equilibrium models, CSF equilibria can be calculated for large transmission networks. Existence and uniqueness properties for prices and profits are reported. An application shows how transmission limits and strategic interactions affect equilibrium prices under forced divestment of generation.

https://hobbsgroup.johnshopkins.edu/docs/papers/Day_Hobbs_IEEE2002.pdf

Oligopolistic competition in power networks: a conjectured supply function approach

Liberalization of infrastructure industries presents classic economic issues about how organization and procedure affect market performance. These issues are examined in wholesale power markets. The perspective from game theory complements standard economic theory to examine effects on efficiency and incentives.

https://www.jstor.org/stable/pdfplus/3082000.pdf

Architecture of Power Markets

As competition is introduced into the electric power industry, access and pricing policy for transmission will play a pivotal role in shaping future market structure and performance. The externalities associated with the loop flow phenomenon in an electric power network constitute a significant barrier to the formation of efficient markets for electricity and transmission services. In this paper, we present a new approach to the design of an efficient market mechanism for transmission access that resolves these externalities. Under a trading rule that combines the Coasian and the Pigouvian principles to resolution of externalities, property rights are defined so that a competitive market could be established for transmission services and electricity to achieve a social optimum within a power pool. We characterize a dynamic trading process which is Lyapunov stable and always converges to a competitive equilibrium. Finally, we discuss some practical applicability and long-term investment issues.

A market mechanism for electric power transmission

This paper examines market design issues for reliability management in competitive power markets The institutional structure is characterized by a power exchange that conducts electricity market trading, a system operator that operates the electric power system, and a property right system for transimission pricing In a competitive market, priority insurance fosters market information for determining efficient system reliability levels and induces system operator to maintain system security efficiently A six-node network example is examined to illustrate the basic insights

Reliability Management in Competitive Electricity Markets

In the 1990’s, we are witnessing a period in which competitive forces are sweeping across the electric power industry around the world. A central issue as more of the market becomes subject to competition is the design of an efficient and robust market organization, a task which is complicated by some unique technological characteristics associated with electric power transmission. An electric power grid differs from other types of networks in that power flows must observe physical laws. This gives rise to the loop flow phenomenon, creating widespread externalities in the markets for electric power, whose complexity only grows with the size of the system. It is widely recognized that these externalities, if not mitigated, will cause inefficient resource allocation.

https://www.jstor.org/stable/info/41322719

An Institutional Design for an Electricity Contract Market with Central Dispatch

Despite much scientific progress over many decades, the nature of global climate change remains highly uncertain, and the possibility of global climate catastrophe is one of the main concerns in public debates about global climate change. In this paper, we present a model which incorporates the risk of climate catastrophe in an analysis of greenhouse gas abatement strategy. In this model, the timing and severity of climate catastrophe are treated probabilistically. The impacts of key uncertainties on optimal policy are analyzed, and the expected values of additional information that reduces the uncertainty associated with the world economy, carbon cycle, climate change, and climate damage are estimated. 18 refs., 4 figs., 4 tabs.

Hung-po Chao

Papers

A market mechanism for electric power transmission

Reliability Management in Competitive Electricity Markets

An Institutional Design for an Electricity Contract Market with Central Dispatch

Managing the Risk of Global Climate Catastrophe: An Uncertainty Analysis

Greenhouse gas abatement: How much? and Who pays?