Capacity Expansion Equilibria in Liberalized Electricity Markets: An EPEC Approach

Wogrin, Sonja; Barquı́n, Julián; Centeno, Efraim

doi:10.1109/tpwrs.2012.2217510

Cited by 80 publications

(46 citation statements)

References 19 publications

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“…Due to the concatenation of several MPEC problems to one EPEC and the resulting high non-linearity, EPECs are even more difficult to solve than MPECs. Previous EPEC models have mostly been used to analyse electricity markets, e.g., by Barroso et al (2006); Sauma and Oren (2007);Yao et al (2008); Shanbhag et al (2011) and Wogrin et al (2013). Lorenczik et al (2014) analyse investment decisions in the metallurgical coal market.…”

Section: Literature Reviewmentioning

confidence: 99%

Assessing market structures in resource markets — An empirical analysis of the market for metallurgical coal using various equilibrium models

Lorenczik

Panke

2016

Energy Economics

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in AbstractThe prevalent market structures found in many resource markets consist of a high concentration on the supply side and a low demand elasticity. Market results are therefore frequently assumed to be an outcome of strategic interaction between producers. Common models to investigate the market outcomes and underlying market structures are games representing competitive markets, strategic Cournot competition and Stackelberg structures taking into account a dominant player acting first followed by one or more followers. Besides analysing a previously neglected scenario of the latter kind, we add to the literature by expanding the application of mathematical models by applying an Equilibrium Problem with Equilibrium Constraints (EPEC), which is used to model multi-leader-follower games, to a spatial market. We apply our model by investigating the prevalent market setting in the international market for metallurgical coal between 2008 and 2010, whose market structure provides arguments for a wide variety of market structures. Using different statistical measures and comparing model with actual market outcomes, we find that two previously neglected settings perform best: First, a setting in which the four largest metallurgical coal exporting firms compete against each other as Stackelberg leaders, while the remainders act as Cournot followers. Second, a setting with BHPB acting as sole Stackelberg leader.

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Section: Literature Reviewmentioning

confidence: 99%

Assessing market structures in resource markets — An empirical analysis of the market for metallurgical coal using various equilibrium models

Lorenczik

Panke

2016

Energy Economics

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“…Both linearization technique and strong duality theory are adopted in [27] [28] [29] to reformulate an EPEC problem into a set of mixed integer linear constraints and solve it to its optimality. A combination of constructing a linearization of EPEC problem and validating the solution optimality by DM is proposed to solve a multi-GENCO's bilevel capacity expansion problem in [30]. Comparison of open loop and closed loop capacity equilibrium in an electricity market is thoroughly discussed in [31].…”

Section: Literature Reviewmentioning

confidence: 99%

A Tri-Level Model of Centralized Transmission and Decentralized Generation Expansion Planning for an Electricity Market—Part I

Jin

Ryan

2014

IEEE Trans. Power Syst.

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We develop a tri-level model of transmission and generation expansion planning in a deregulated power market environment. Due to long planning/construction lead times and concerns for network reliability, transmission expansion is considered in the top level as a centralized decision. In the second level, multiple decentralized GENCOs make their own capacity expansion decisions while anticipating a wholesale electricity market equilibrium in the third level. The collection of bi-level games in the lower two levels forms an equilibrium problem with equilibrium constraints (EPEC) that can be approached by either the diagonalization method (DM) or a complementarity problem (CP) reformulation. We propose a hybrid iterative solution algorithm that combines a CP reformulation of the tri-level problem and DM solutions of the EPEC sub-problem. KeywordsComplementarity problem, equilibrium problem with equilibrium constraints, generation expansion planning, mathematical program with equilibrium constraints, Nash equilibrium, transmission expansion planning Abstract-We develop a tri-level model of transmission andgeneration expansion planning in a deregulated power market environment. Due to long planning/construction lead times and concerns for network reliability, transmission expansion is considered in the top level as a centralized decision. In the second level, multiple decentralized GENCOs make their own capacity expansion decisions while anticipating a wholesale electricity market equilibrium in the third level. The collection of bi-level games in the lower two levels forms an equilibrium problem with equilibrium constraints (EPEC) that can be approached by either the diagonalization method (DM) or a complementarity problem (CP) reformulation. We propose a hybrid iterative solution algorithm that combines a CP reformulation of the tri-level problem and DM solutions of the EPEC sub-problem.

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“…However, many of these models are deficient in one way or another. For example, in many bi-level models such as [7,10,[28][29][30][31][32][33][34] presented, the market price prediction model was used but the existence of a strategic company for the production development planning was not considered.…”

Section: Introductionmentioning

confidence: 99%

“…The market in [30,31] was modeled using the conjecture price approach in the lower level of the problem while ref [29] used Cournot modeling approach their work. Although, the market price was considered a variable in the bi-level models presented for the production expansion planning problem in [9] and [13] strategic companies were not taken into account in the studies.…”

Section: Introductionmentioning

confidence: 99%

Generation expansion planning in electricity market considering uncertainty in load demand and presence of strategic GENCOs

Valinejad

Marzband

Akorede

et al. 2017

Electric Power Systems Research

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This paper presents a new framework to study the generation capacity expansion in a multi-stage horizon in the presence of strategic generation companies (GENCOs). The proposed three-level model is a pool-based network-constrained electricity market that is presented under uncertainty in the predicted load demand modeled by the discrete Markov model. The first level includes decisions related to investment aimed to maximize the total profit of all GENCOs in the planning horizon, while the second level entails decisions related to investment aimed at maximizing the total profit of each GENCO. The third level consists of maximizing social welfare where the power market is cleared. The three-level optimization problem is converted to a one-level problem through an auxiliary mixed integer linear programming (MILP) using primal-dual transformation and Karush-Kuhn-Tucker (KKT) conditions. The efficiency of the proposed framework is examined on MAZANDARAN regional electric company (MREC) transmission network-a part of the Iranian interconnected power system. Simulation results confirm that the proposed framework could be a useful tool for analyzing the behaviour of investment in electricity markets in the presence of strategic GENCOs.Keywords: Generation expansion planning, mathematical programming of equilibrium constraints problem, dynamic planning, strategic GENCO, uncertainty, three-level model. Nomenclature

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Capacity Expansion Equilibria in Liberalized Electricity Markets: An EPEC Approach

Cited by 80 publications

References 19 publications

Assessing market structures in resource markets — An empirical analysis of the market for metallurgical coal using various equilibrium models

Assessing market structures in resource markets — An empirical analysis of the market for metallurgical coal using various equilibrium models

A Tri-Level Model of Centralized Transmission and Decentralized Generation Expansion Planning for an Electricity Market—Part I

Generation expansion planning in electricity market considering uncertainty in load demand and presence of strategic GENCOs

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