Quantitative impact assessment of transmission congestion and demand side management on electricity producers’ market power

Abstract

Abstract This paper presents the impact of transmission congestion and demand side management on Electricity Producers’ market power using the quantitative investigation of pool-based market clearing mechanism. The mathematical problem formulation for pool-based market clearing consists of maximization of social welfare objective function, which incorporates maximization of demand benefit obtained from flexible demand bids and minimization of Electricity Producers’ real and reactive power costs obtained from actual and strategic supply bids. In this problem formulation, the nonlinear modeling of power system is used for real and reactive power flow equality constraints, transmission line capability inequality constraints (for incorporating the impact of transmission congestion), and generator capability curve equality constraints. The impacts of demand side management have been incorporated in the problem by considering single-period and multi-period demand flexibilities, and distributed generation placement at appropriate locations. The formulated optimization problem has been solved using nonlinear programming, which provides the nodal prices as byproducts of the solution. The electricity producers’ capability to exercise market power has been analyzed from their revenue and surplus indices, which have been obtained from nodal prices. Various case studies have been simulated on IEEE 30-bus system for quantitative determination of electricity producers’ market power. The results obtained are very interesting and demonstrate demand side strategies to tackle the electricity producers’ market power with actual and strategic bidding under normal and congested system conditions.