A two stage stochastic equilibrium model for electricity markets with two way contracts |
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Authors: | Dali Zhang Huifu Xu Yue Wu |
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Institution: | 1. School of Mathematics, University of Southampton, Southampton, SO17 1BJ, UK 2. School of Management, University of Southampton, Southampton, SO17 1BJ, UK
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Abstract: | This paper investigates generators’ strategic behaviors in contract signing in the forward market and power transaction in
the electricity spot market. A stochastic equilibrium program with equilibrium constraints (SEPEC) model is proposed to characterize
the interaction of generators’ competition in the two markets. The model is an extension of a similar model proposed by Gans
et al. (Aust J Manage 23:83–96, 1998) for a duopoly market to an oligopoly market. The main results of the paper concern the
structure of a Nash–Cournot equilibrium in the forward-spot market: first, we develop a result on the existence and uniqueness
of the equilibrium in the spot market for every demand scenario. Then, we show the monotonicity and convexity of each generator’s
dispatch quantity in the spot equilibrium by taking it as a function of the forward contracts. Finally, we establish some
sufficient conditions for the existence of a local and global Nash equilibrium in the forward-spot markets. Numerical experiments
are carried out to illustrate how the proposed SEPEC model can be used to analyze interactions of the markets. |
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