Analyzing Effects of Generation Limits on the Equilibrium in the Electricity Markets.

This article considers a game theoretic situation for an analysis of electricity spot markets modeled by uniform price auctions. The properties of equilibrium in the electricity spot markets are analyzed and the effects of generation limits on the equilibrium are analytically explored. Generation firms, which are supposed to maximize their profits through optimal bidding strategies, submit their generation offers in the form of sealed bid and the markets operate as uniform price auctions. Generation quantities allocated to individual firms and market clearing prices, which determine profits of generation firms, are affected by their bidding strategies and strategic interactions among generation firms as well. In this article, two market situations are considered. In the first situation, unconstrained market condition is considered. No generation quantity of firms is binding on its maximum limit. In the other situation, constrained market condition is dealt with. The generation quantity of generation firms is constrained to its limit and the variation of market equilibriums are analytically examined. For both cases, best responses of the individual firms and consequent optimal bidding strategies at equilibriums are analytically derived. Finally, effects of generation limits upon market equilibriums are investigated, focused on the variation of market equilibriums which is resulted from the strategic behaviors of generation firms. A simple numerical example with two generation firms is provided to show the basic idea of the proposed method. [ABSTRACT FROM AUTHOR]