Market power detection and mitigation measures for the spot electricity market based on bidding equilibrium

Abstract

The spot electricity market (SEM) faces the challenge of inefficiency problems from market power (MP) abuse. However, previous studies have not adequately addressed such issues as the feasibility of MP mitigation measurements and authenticity of MP detection indicators. In this study, mitigation methods are developed, and MP detection indicators are designed to detect and mitigate the exercise of MP in an SEM in which multiple generators compete unilaterally through a uniform marginal clearing price mechanism. First, the incentives and general rules for rational generators to exercise their MP are analysed, providing theoretical support for the developed approaches. Then, two mechanisms that can mitigate the exercise of MP are devised by limiting the bid increase rate and maximising the consumer surplus. Furthermore, a behavioural detection indicator is designed to measure the MP of an individual generator, while an overall indicator is defined to assess the MP of an entire market. Finally, a joint clearing model is established to help implement the mechanism while promoting a high proportion of renewable energy consumption in the SEM. Case studies demonstrate the effectiveness and feasibility of the proposed approaches.