Analysis Of Market Power In Electricity Markets

Electricity markets will play an important role in determining electricity price and guiding power supply and demand in the process of worldwide electric power industry reform. However, the practical electricity market is closely akin to oligopoly because of characteristics of power industry and limited number of generation companies (Gencos). The Gencos can raise market price to gain larger profit by exerting market power. This dissertation focuses on the analysis of issues of market power in electricity markets.Firstly, different definitions of market power in electricity markets are introduced. The classification, influencing factors, evaluation indices and methods to mitigate market power are also proposed.Secondly, this dissertation analyzes the change of market power after vertical integration between a Genco and the only grid company by Lerner index. Cournot model and Stackelberg model are used to simulate Gencos'strategic behavior in wholesale electricity market while grid company or ISO (Independent System Operator) operates system. The impact of Gencos'cost, cost and profit margin of grid company and level of demand on market power are also discussed. IEEE 30-bus test system employed as an example, the results show that market power is mitigated after vertical integration when ISO rules, but uncertain when grid company runs the market.Finally, after categories and function of electricity bilateral contracts being addressed, Cournot model is corrected to simulate Gencos'strategies accounting for forward contracts in wholesale electricity market. The equilibrium solution is given while contract price is fixed or related to market clearing price. The analytical results reveal that forward contracts can reduce electricity price and eliminate market power dramatically. Gencos might have no incentives to attend forward contracts, so effective measures should be worked out to encourage it.