Market Power Monitoring Research Articles

A new design for market power monitoring in the electricity market. A simulation for Italy

The liberalization of electricity markets has been dominated by conditions of oligopoly and market power, as shown in numerous studies in empirical literature on the supply side. However, regulators have used statistical measurements to monitor the extent of market power, making little reference to founded theoretical approaches. This paper provides a new contribution to the literature on the electricity market by presenting a theoretical and empirical model to construct competitive equilibrium, and estimating market power on both the supply and demand side of the day-ahead electricity market. We implement an accurate measurement of the welfare loss associated with non-competitive market conditions, based on ex-ante demand and supply behavior.This model provides a useful analytical tool for regulators and policy-makers in order to implement pro-competitive regulation. We perform an empirical simulation to show the effects of non-competitive equilibria on the Italian hourly markets over the period 2013–2014. In an ideal competitive market, prices would be lower than historical prices by about 2–5% and quantities would be higher by about 0.5–1%.

Risk Warning System of Market Power Monitoring in Electricity Market

The electricity market is involved in a large number of stakeholders, the risk is complex, and the market power will exacerbate the crisis after openness of the electricity market. If regulators can build the electricity market risk warning system in advance, they can detect risk signals in advance and take effective measures to avoid electricity power crisis. This paper focuses on building the electricity market power risk warning system. Thus, we firstly establish a set of indicators that can reflect the electricity market risk condition scientifically, and then estimate the threshold value of risk indicators by using the VaR method based on GARCH model. The risk warning system with five levels of signals is proposed by using the estimated VaR values of the indicator under different confidence, and it is validated to be feasible and effective. Finally, some measures are proposed to respond to different types of risk warning.

Research on operation monitoring system of spot electricity market

At present, the power system reform has entered a critical period, and the construction of electric power spot market is the core link of deepening the reform of electric power system. In this paper, based on the spot market, combined with the theory of power market operation analysis and monitoring, on the one hand, it analyzes the establishment of power market operation evaluation index system frame, on the other hand, it puts forward the basic principle of power market operation monitoring. Market power monitoring in the electricity market is a key direction that the power regulatory agencies in the market-oriented environment pay close attention to and urgently need to study. We should actively study and explore the market operation monitoring system to adapt to the characteristics of China’s power industry and power market reform.

A Structural Characterization of Market Power in Electric Power Networks

We consider a market in which capacity-constrained generators compete in scalar-parameterized supply functions to serve an inelastic demand spread throughout a transmission constrained power network. The market clears according to a locational marginal pricing mechanism, in which the independent system operator (ISO) determines the generators' production quantities to minimize the revealed cost of meeting demand, while ensuring that network transmission and generator capacity constraints are met. Under the stylizing assumption that both the ISO and generators choose their strategies simultaneously, we establish the existence of Nash equilibria for the underlying market, and derive an upper bound on the allocative efficiency loss at Nash equilibrium relative to the socially optimal level. We also characterize an upper bound on the markup of locational marginal prices at Nash equilibrium above their perfectly competitive levels. Of particular relevance to ex ante market power monitoring, these bounds reveal the role of certain market structures---specifically, the \emph{market share} and \emph{residual supply index} of a producer---in predicting the degree to which that producer is able to exercise market power to influence the market outcome to its advantage. Finally, restricting our attention to the simpler setting of a two-node power network, we provide a characterization of market structures under which a Braess-like paradox occurs due to the exercise of market power---that is to say, we provide a necessary and sufficient condition on market structure under which the strengthening of the network's transmission line capacity results in the (counterintuitive) increase in the total cost of generation at Nash equilibrium.

The Process of Liberalization of Electricity Market in Albania

The motivation for electricity liberalization differs slightly between countries; however most of the countries share common ideological and political reasons regarding disaffection with the vertically integrated monopoly model of the past and a strong belief that the success of liberalization in other industries can be repeated for the electricity industry. The introduction of competition in the electricity industry has been justified by the perceived benefits of introducing market forces in an industry previously viewed as a natural monopoly with substantial vertical economies. Therefore the motivation behind electricity liberalization is to promote in the long run efficiency gains, to stimulate technical innovation and to lead to efficient investment.First the project is reviewing from the literature, the available information on market power monitoring in electricity markets. There are briefly explained definitions, strategies, indices and methods of mitigating market power as well as the several methods of detecting market power used from market monitors/regulators. After, the general features of the electricity industry are presented briefly as background for the analysis. The main aspects of the liberalization process of this industry and the role it has played in the creation of PX-s is described.

LMP decomposition: A novel approach for structural market power monitoring

The main goal of this paper is to decompose and then analyze the locational marginal price (LMP) for monitoring the ability of the generation companies (GenCos) to exercise market power. To achieve this goal, the electricity price discovery mechanism is restated and it is shown that the LMP at bus n (LMPn) is composed of three components. The first is a constant value for each bus, while the second component includes the weighted summation of the strategies of the GenCos which not facing their generation caps, and the third component is composed of the weighted sum of generation of the units that facing their generation caps.The proposed decomposition produces important information regarding LMP. First, the weighting coefficients of the second and third terms indicate the sensitivity of LMPn to the bidding strategies and generations of units. Furthermore, the decomposition of LMPn to the constitutive components reveals the contribution of each GenCos to the electricity price at bus n. Hence, the weighting coefficients and the price components of the GenCos represent the potential for structural market power of the GenCos to the price discovery at each bus. The simulation results on the IEEE 24-bus test system illustrate the efficiency of the proposed monitoring approach.

Market power monitoring under open access system

In this paper, an engineering procedure is proposed for complete market power monitoring under open access system. Market power monitoring of any given system or network is done by using market power assessment and market power indices For any given network, market power assessment is to identify which generation company (GENCO) raised their prices when the demand in the concerned area is increased. After identifying the GENCO who raised their prices, market power indices are used to indicate how much market power have been used to raise their prices. In this paper, three market power indices, relative market power (RMP), Lerner index (LI) and Herfindahl-Hirschman index (HHI) are used for identifying the existence of market power. The impact of load variation, price variation and random failures on market power has been investigated by performing three experiments. These experiments were conducted using MATPOWER, which simulates a full AC network with IEEE 30 bus system, six of which are generators.

Market power assessment in electricity markets: supply function equilibrium-based model

SUMMARY Because of the oligopoly structure of the electricity markets, the Generation Companies (GenCos) may exert market power by using bidding strategies such as capacity withholding. This brings the market clearing price higher and the quantity generated of the market lower. In this article, capacity withholding in an oligopolistic electricity market in that all GenCos bid in the supply function equilibrium model is analyzed and the capacity withheld index, the capacity distortion index and the price distortion index are formulated. Demand elasticity and forward contracts can significantly affect the GenCos' capacity withholding in the market. The potential ability of market for capacity withholding is measured by the distortion–withheld index proposed in this article. The finding in this article is helpful for market power monitoring and mitigating. A two-settlement market including a forward market and a spot market is used to describe GenCos' strategic forward contracting and spot market competition. Copyright © 2012 John Wiley & Sons, Ltd.

06/02463 Market power monitoring and mitigation in the US wholesale power markets: Helman, U. Energy, 2006, 31, (6–7), 877–904.

06/02463 Market power monitoring and mitigation in the US wholesale power markets: Helman, U. Energy, 2006, 31, (6–7), 877–904.

Market power monitoring and mitigation in the US wholesale power markets

Under current statutory requirements, the Federal Energy Regulatory Commission (FERC) must ensure that prices in US wholesale power markets are ‘just and reasonable’. This has been interpreted by the agency and the courts as requiring the monitoring and mitigation of undue market power. This paper focuses on generation market power. Prior to electricity sector restructuring, wholesale bilateral power trading took place among vertically integrated monopoly utilities trading at the margin or between small independent producers and the utilities. Under those conditions, the authorization of trading at market prices, called ‘market-based rates’, required only that the generation supplier pass a simple market share screen for market power. As restructuring unfolded, and market conditions changed, there has been a steady evolution in FERC's market power mitigation rules, encompassing (a) changes in the market power assessment required for granting market-based rates and related methods for merger approval, and (b) development and refinement of new techniques for screening and mitigating offers into the organized day-ahead and real-time markets operated by Independent System Operators (ISOs) and Regional Transmission Organizations (RTOs). This paper reviews these changes to date, as FERC continues to clarify its approved rules and procedures. It also examines recent methods for quantitative market power analysis that could augment current procedures or supplant them, as found appropriate.

A proposed market power monitoring model for restructuring electricity markets

This paper presents a market power monitoring model for electricity markets. It is a social welfare maximization model subject to nonnegative short-term profit constraints. Traditional economics claims that market power exists whenever the price is above the corresponding marginal cost. However, this paper argues that a generator cannot be considered to be exercising any market power if it earns zero profit considering only variable cost.