Identification and regulatory methods of market power in electricity forward market

Abstract

The electricity forward market provides electricity price signals and locks the basic income for the trading entities of the spot market. It does not trade as frequently as the electricity spot market; under the circumstances, the entities in possession of market power have less opportunity to exercise market power. In the past years, the role of the electricity forward market has been considered as hedging price risk in the spot market, but even in the forward market with low transaction frequency, units that possess market power have an excessive profit motive. Consequently, the identification and regulation of market power are as important in the forward market as in the spot market. The paper sums up the methods of market power identification in China and foreign electric power markets and analyzes the exercise ways of market power under different forward market trading types. Based on the analysis results, combined with the design logic of identifying spot market power in China and foreign countries, the paper proposes methods to identify and regulate market power in the electric power forward market.