Handbook of Networks in Power Systems I
Energy has been an inevitable component of human lives for decades. Recent rapid developments in the area require analyzing energy systems not as independent components but rather as connected interdependent networks. The Handbook of Networks in Power Sys
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Abstract Starting from the nineties of the last century, competition has been introduced in the electricity industry around the world, as a tool to increase market efficiency and decrease prices. Electricity is a commodity that needs to be traded over a physical network with strict physical and operational constraints that cannot be found in other commodity markets. Present electricity markets may be better described in terms of oligopoly than of perfect competition from which they may be rather far. In an oligopoly market, the producer is a market player that shows strategic behavior, submitting offers higher than the marginal costs, as they under perfect competition, with the aim to maximize its individual surpluses. The market clearing price, quantities and the market efficiency depending on the strategic interactions among producers must be taken into account in modeling competitive electricity markets. The network constraints provide very specific opportunities of exercising strategic behaviors to the market participants. Game theory provides a conceptual framework and analytical tool to model such a context. The modeling of electricity markets will be presented by discussing the traditional Game Theory models, such as bertrand, cournot, conjecture supply function, supply function equilibrium, adapted to be able to capture, in determining the Nash equilibrium, the network structure of the system in which the market is
E. Bompard (*) Department of Electrical Engineering, Polytechnic di Torino, Torino, Italy CERIS-CNR (Institute for Economic Research on Firms and Growth of the National Research Council), Moncalieri (TO), Italy e-mail: [email protected] Y. Ma Department of Electronic & Electrical Engineering, University of Strathclyde, Glasgow, UK e-mail: [email protected] A. Sorokin et al. (eds.), Handbook of Networks in Power Systems I, Energy Systems, DOI 10.1007/978-3-642-23193-3_1, # Springer-Verlag Berlin Heidelberg 2012
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E. Bompard and Y. Ma
implemented. A formalized representation and a comparison of some of the most common game theory models will be provided with some conceptual examples. In addition, some newly proposed approaches for strategic bidding modeling based on the complex systems techniques such as Multi Agent systems and Complex Networks will be mentioned and some related references provided. Keywords Electricity markets • Game theory • Network constraints • Strategic bidding
1 Introduction The electric power industry has over the years been dominated by large state-owned monopolies that had an overall authority over all the activities in generation, transmission and distribution of power within their jurisdiction. Chile is often considered as the first Country to introduce liberalization in the electricity sector in 1982. Regulatory reforms of the industry in the United States started in 1978 with the passage of the Public Utility Regulatory Policies Act; regulatory reform was accelerated over the latter half of the 1990s with the advent of the open access transmiss
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