1 research outputs found
Supply Function Equilibrium in Networked Electricity Markets
We study deregulated power markets with strategic power suppliers. In
deregulated markets, each supplier submits its supply function (i.e., the
amount of electricity it is willing to produce at various prices) to the
independent system operator (ISO), who based on the submitted supply functions,
dispatches the suppliers to clear the market with minimal total generation
cost. If all suppliers reported their true marginal cost functions as supply
functions, the market outcome would be efficient (i.e., the total generation
cost is minimized). However, when suppliers are strategic and aim to maximize
their own profits, the reported supply functions are not necessarily the true
marginal cost functions, and the resulting market outcome may be inefficient.
The efficiency loss depends crucially on the topology of the underlying
transmission network. This paper provides an analytical upper bound of the
efficiency loss due to strategic suppliers, and proves that the bound is tight
under a large class of transmission networks (i.e., weakly cyclic networks).
Our upper bound sheds light on how the efficiency loss depends on the
transmission network topology (e.g., the degrees of nodes, the admittances and
flow limits of transmission lines).Comment: 13 pages, 6 figure