Development of an Analytical Framework for Strategic Bidding in Competitive Electricity Markets: Modeling and Policy Analysis

University Of Illinois At Urbana-Champaign, Urbana IL

Investigators

Abstract

This proposal is a well-defined example of collaborative efforts between engineers and economists in the field of competitive electric power industry. This collaboration is essential for development of necessary understanding and computer tools for this industry. More specifically, the proposal deals with a development of a general framework that integrates game-theoretic aspects of power markets with the operational/physical constraint of electric power systems. The object is to develop an analytical framework for studying the design, functioning and performance of alternative market mechanisms, considering the game theoretic aspects of those markets subject to the unique physical constraints of the system. Simulation tools will be developed and utilized to "illustrate the performance of various market designs, rule specifications, regulatory policies, and strategic behavior of the various players. A significant tradeoff is addressed, that between model complexity and study of multifarious solution strategies. Unlike most economic studies, the former is preferred to the latter, as being more realistic and informative in the present context.