Equilibrium Predictions in Wholesale Electricity Markets

Abstract

We review supply function equilibrium models and their predictions on market outcomes in the wholesale electricity auctions. We discuss how observable market characteristics such as capacity constraints, number of power suppliers, load distribution and auction format affect the behavior of suppliers and performance of the market. We specifically focus on the possible market power exerted by pivotal suppliers and the comparison between discriminatory and uniform-price auctions. We also describe capacity investment behavior of electricity producers in the restructured industry.

The Impact of Lead Time on Capital Investments

“…These features are the key ingredients of our modeling aspect and add realism to the capital accumulation 1 In a recent report published by International Energy Agency (IEA, 2016), available at https://www.iea.org/publications/freepublications/publication/REPOWERINGMARKETS.pdf in Figure 1.2, we observe that electricity markets have been restructured in most jurisdictions in the world, with dierent degrees of competition being introduced both in wholesale and retail sectors. See also Genc (2012) for restructuring issues. competition.…”