A Price Competition Model in MCP and PAB Pricing Considering Different Capacity Constraints
SHI Zhan-wu, YANG Li, GAN De-qiang (Zhejiang University, Hangzhou 310027, China)
A key topic in the electricity market research is how to predict or analyze the performance of a given market design. The answer to the question can significantly influence the policy-making. In this paper, a bilevel programming price competition game is formulated for modeling oligopolistic competition in a single-period electricity market auction, with the assumption that generator marginal costs are identical. Nash equilibrium under tight and weak capacity constraints both in market clearing price (MCP) and pay as bid (PAB) pricing are also characterized. In theory, it is deduced that PAB pricing reduces price volatility under tight capacity constraints with the cost of higher average market price.