Market power risk prevention mechanism of China’s electricity spot market based on stochastic evolutionary game dynamics

Abstract

The construction of China’s power spot market is still in its early stage, with a high concentration on generation-side resources and frequent market power. It is urgent to establish risk prevention mechanisms for the generation of market power. First, the paper establishes a basic framework of the stochastic evolutionary game theory and then builds a “stochastic evolutionary game market-clearing” model for the market regulator and risk units. Second, the work provides a library of multi-dimensional monitoring and evaluation indicators for the regulator and creates a quantitative risk prevention strategy for the power spot market in China. Finally, an evolutionary dynamic analysis is conducted on players’ strategic evolution space and changes in market risks. Based on a simulation of actual data from an electricity market in China, it turns out that the generation-side market power risk prevention mechanism can lower market transaction and operational risks in a variety of power supply–demand scenarios. The study theoretically supports the development of market power risk prevention and provides more realistic insights into China’s power spot market as well.