Abstract
Restructuring of electricity market in Iran has been accepted and operationalized following the power market in industrial countries. Increasing of efficiency through insertion of economic considerations and transition from monopoly to more competitive conditions in order to become closer to the optimal status are the basis to accept restructuring. Given to the market structure, imperfect competition is ultimately fulfilled in this market that games theory solutions should be used to analyze it. On the other side, given to bidding and pay-as-bid (PAB) in Iran's electricity market, supply function equilibrium (SFE) models is suitable for analysis. Therefore, having proposed function and the suitable theoretical model and estimated marginal cost function and uncertainty demand parameters, in the framework of SFE approach, the optimal supply function equilibrium of one of the firms of the electricity market in Isfahan was extracted by means of MATLAB software. Then it was compared with the proposed supply function. The obtained results revealed that the current proposed supply function does not conform to the theoretical optimal supply function in Nash equilibrium.
Highlights
In much of the twentieth century electricity users across the world had to buy electric energy from the Utility which held the monopoly to supply electricity
Having proposed function and the suitable theoretical model and estimated marginal cost function and uncertainty demand parameters, in the framework of SFE approach, the optimal supply function equilibrium of one of the firms of the electricity market in Isfahan was extracted by means of MATLAB software
Prices corresponding to different production values due to model implementation were calculated for peak hours of consumption on July 22, 2012 and the price-optimal value list based on supply function equilibrium approach (SFE) was extracted
Summary
In much of the twentieth century electricity users across the world had to buy electric energy from the Utility which held the monopoly to supply electricity. Strategy of each firm should be selected based on the game theory and considering demand uncertainty on the basis of the expected profit maximization given to the selected supply function system and pay as bid and limited manufacturers in electricity markets including Iran's electricity market. Holmberg (2006) considered an electricity market under conditions of uniform price auction and demand uncertainty in an article entitled "uniform supply function equilibrium with capacity limitations". Manufacturers in this market offer their bids in the form of supply function.
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