Analysis of power transaction by solving Nash Equilibrium in electricity markets with Financial Transmission Rights

Abstract

This paper looks at the influence of Financial Transmission Rights (FTRs) on the market value(Social Welfare; SW) in the competitive electricity market. The transmission line constraints make it difficult to compute the Nash Equilibrium (NE) due to causing a mixed strategy NE instead of a pure strategy NE. Computing a mixed strategy is more complicated in a multi-player game. The aim of this paper are to compute a mixed strategy NE and analyze SW in power transaction with FTRs. This paper introduces a formula and a technique for solving NE of multi-player game with FTRs. A formula based on two heuristics is introduced for finding a mixed strategy NE in a multiplayer game depending on the network configuration. The heuristics are based on empirical studies of mixed strategies in numerous sample systems. Also, to verify that the solution of the numerical results is a NE, we show numerical results for the marginal profits of the electricity market. Finally, this paper proposed that SW is the smallest when generation company with the smallest PTDF holds the transmission rights.