Dynamic competitive equilibria in electricity markets

Gui Wang, Matias Negrete-Pincetic, Anupama Kowli, Ehsan Shafieepoorfard, Sean Meyn, Vinayak V. Shanbhag

Research output: Chapter in Book/Report/Conference proceedingChapter

20 Scopus citations

Abstract

This chapter addresses the economic theory of electricity markets, viewed from an idealized competitive equilibrium setting, taking into account volatility and the physical and operational constraints inherent to transmission and generation. In a general dynamic setting, we establish many of the standard conclusions of competitive equilibrium theory: Market equilibria are efficient, and average prices coincide with average marginal costs. However, these conclusions hold only on average. An important contribution of this chapter is the explanation of the exotic behavior of electricity prices. Through theory and examples, we explain why, in the competitive equilibrium, sample-paths of prices can range from negative values, to values far beyond the "choke-up" price-which is usually considered to be the maximum price consumers are willing to pay. We also find that the variance of prices may be very large, but this variance decreases with increasing demand response.

Original languageEnglish (US)
Title of host publicationControl and Optimization Methods for Electric Smart Grids
PublisherSpringer New York
Pages35-62
Number of pages28
ISBN (Electronic)9781461416050
ISBN (Print)9781461416043
DOIs
Publication statusPublished - Jan 1 2012

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All Science Journal Classification (ASJC) codes

  • Engineering(all)

Cite this

Wang, G., Negrete-Pincetic, M., Kowli, A., Shafieepoorfard, E., Meyn, S., & Shanbhag, V. V. (2012). Dynamic competitive equilibria in electricity markets. In Control and Optimization Methods for Electric Smart Grids (pp. 35-62). Springer New York. https://doi.org/10.1007/978-1-4614-1605-2