Screening Instruments for Monitoring Market Power in Wholesale Electricity Markets   Lessons from Applications in Germany

Bataille, Marc; Steinmetz, Alexander; Thorwarth, Susanne

doi:10.2139/ssrn.2475943

Cited by 11 publications

(6 citation statements)

References 20 publications

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“…On the contrary, when RSI is less than 100%, other suppliers cannot meet the market demand without company i, so company i has a certain market power and influence on the market clearing price [110,114]. While this parameter does not represent the potential of a company to withhold capacity, the Return on Withholding Capacity index was presented to compensate for the shortcomings of RSI [115]. Compared to HHI and MSI, RSI can capture dynamic market parameters [103].…”

Section: Residual Supply Index (Rsi)mentioning

confidence: 99%

“…The two parameters, RSI and PSI, are similar, but RSI is more refined. The RSI has had an important influence, for example, as the predictor of the power market [112,113], when it was first used by FERC as an assessment indicator to determine the market power of suppliers in the electricity market [115].…”

Section: Residual Supply Index (Rsi)mentioning

confidence: 99%

“…Both of these strategies have an impact on costs and prices. RWC [115] represents the possibility of capacity withholding by the supplier. It is defined as follows:…”

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confidence: 99%

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Market Manipulation in Stock and Power Markets: A Study of Indicator-Based Monitoring and Regulatory Challenges

et al. 2023

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In recent years, algorithmic-based market manipulation in stock and power markets has considerably increased, and it is difficult to identify all such manipulation cases. This causes serious challenges for market regulators. This work highlights and lists various aspects of the monitoring of stock and power markets, using as test cases the regulatory agencies and regulatory policies in diverse regions, including Hong Kong, the United Kingdom, the United States and the European Union. Reported cases of market manipulations in the regions are examined. In order to help establish a relevant digital regulatory system, this work reviews and categorizes the indicators used to monitor the stock and power markets, and provides an in-depth analysis of the relationship between the indicators and market manipulation. This study specifically compiles a set of 10 indicators for detecting manipulation in the stock market, utilizing the perspectives of return rate, liquidity, volatility, market sentiment, closing price and firm governance. Additionally, 15 indicators are identified for detecting manipulation in the power market, utilizing the perspectives of market power (also known as pricing power or market structure), market conduct and market performance. Finally, the study elaborates on the current challenges in the regulation of stock and power markets in terms of parameter performance, data availability and technical requirements.

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Section: Residual Supply Index (Rsi)mentioning

confidence: 99%

Section: Residual Supply Index (Rsi)mentioning

confidence: 99%

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Market Manipulation in Stock and Power Markets: A Study of Indicator-Based Monitoring and Regulatory Challenges

et al. 2023

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“…It can charge prices for adjusting its consumption that are significantly higher than its marginal cost of shifting loads. This problem is analogous to the pivotal supplier problem in wholesale electricity markets [13]. A similar case has been assessed in [14] for wind power operators in coupled local and central (wholesale) markets.…”

Section: A Price Control: Market Powermentioning

confidence: 99%

Market Failures in Local Flexibility Market Proposals for Distribution Network Congestion Management

Hennig

Tindemans

Vries

2022

2022 18th International Conference on the European Energy Market (EEM)

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The steady uptake of PV cells and high-power flexible loads such as electric vehicles (EVs) and heat pumps can lead to localized network congestion, if their power consumption or feedin is not controlled well. One potential way that has been proposed to manage this congestion, are so-called Local Flexibility Markets. It is often argued, that these proposals are theoretically efficient, as they are market-based. However, some of these proposals may suffer from design flaws that allow market participants to obtain undue profits at the expense of the network operator. In this contribution, we discuss which kinds of market failures can occur based on theoretical reasoning and demonstrate them in a toy model. Based on this, we argue for a more careful consideration of congestion management options.

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“…If, on the other hand, RSI j 1, then producer j is far from being pivotal, and will likely have little market power to influence the market clearing price. In practice, the residual supply index has proved to be effective in predicting the exercise of market power in electricity markets [45], [58], [59], [60], [61]. For example, it was shown in [57] that market clearing prices are close to being competitive on average if the RSI of the largest producer is no less than 120%.…”

Section: Structural Market Power Indicesmentioning

confidence: 99%

A Structural Characterization of Market Power in Electric Power Networks

Lin

Bitar

2020

IEEE Trans. Netw. Sci. Eng.

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We consider a market in which capacity-constrained generators compete in scalar-parameterized supply functions to serve an inelastic demand spread throughout a transmission constrained power network. The market clears according to a locational marginal pricing mechanism, in which the independent system operator (ISO) determines the generators' production quantities to minimize the revealed cost of meeting demand, while ensuring that network transmission and generator capacity constraints are met. Under the stylizing assumption that both the ISO and generators choose their strategies simultaneously, we establish the existence of Nash equilibria for the underlying market, and derive an upper bound on the allocative efficiency loss at Nash equilibrium relative to the socially optimal level. We also characterize an upper bound on the markup of locational marginal prices at Nash equilibrium above their perfectly competitive levels. Of particular relevance to ex ante market power monitoring, these bounds reveal the role of certain market structures-specifically, the market share and residual supply index of a producer-in predicting the degree to which that producer is able to exercise market power to influence the market outcome to its advantage. Finally, restricting our attention to the simpler setting of a two-node power network, we provide a characterization of market structures under which a Braess-like paradox occurs due to the exercise of market power-that is to say, we provide a necessary and sufficient condition on market structure under which the strengthening of the network's transmission line capacity results in the (counterintuitive) increase in the total cost of generation at Nash equilibrium.

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Screening Instruments for Monitoring Market Power in Wholesale Electricity Markets Lessons from Applications in Germany

Cited by 11 publications

References 20 publications

Market Manipulation in Stock and Power Markets: A Study of Indicator-Based Monitoring and Regulatory Challenges

Market Manipulation in Stock and Power Markets: A Study of Indicator-Based Monitoring and Regulatory Challenges

Market Failures in Local Flexibility Market Proposals for Distribution Network Congestion Management

A Structural Characterization of Market Power in Electric Power Networks

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