Market Power in the Nordic Wholesale Electricity Market: A Survey of the Empirical Evidence

We review the recent empirical research concerning market power on the Nordic wholesale market for electricity, Nord Pool. There is no evidence of blatant and systematic exploitation of system level market power on Nord Pool. However, generation companies seem from time to time able to take advantage of capacity constraints in transmission to wield regional market power. Market power can manifest itself in a number of ways which have so far escaped empirical scrutiny. We discuss investment incentives, vertical integration and buyer power, as well as withholding of base-load (nuclear) capacity.Electricity Markets; Deregulation; Market Power; Hydro Power; Transmission Constraints

Supporting high penetrations of renewable generation via implementation of real-time electricity pricing and demand response

The rollout of smart meters raises the prospect that domestic customer electrical demand can be responsive to changes in supply capacity. Such responsive demand will become increasingly relevant in electrical power systems, as the proportion of weather-dependent renewable generation increases, due to the difficulty and expense of storing electrical energy. One method of providing response is to allow direct control of customer devices by network operators, as in the UK 'Economy 7' and 'White Meter' schemes used to control domestic electrical heating. However, such direct control is much less acceptable for loads such as washing machines, lighting and televisions. This study instead examines the use of real-time pricing of electricity in the domestic sector. This allows customers to be flexible but, importantly, to retain overall control. A simulation methodology for highlighting the potential effects of, and possible problems with, a national implementation of real-time pricing in the UK domestic electricity market is presented. This is done by disaggregating domestic load profiles and then simulating price-based elastic and load-shifting responses. Analysis of a future UK scenario with 15 GW wind penetration shows that during low-wind events, UK peak demand could be reduced by 8-11 GW. This could remove the requirement for 8-11 GW of standby generation with a capital cost of £2.6 to £3.6 billion. Recommended further work is the investigation of improved demand-forecasting and the price-setting strategies. This is a fine balance between giving customers access to plentiful, cheap energy when it is available, but increasing prices just enough to reduce demand to meet the supply capacity when this capacity is limited

Essays on the Economics of Congestion Management - Theory and Model-based Analysis for Central Western Europe

Concerning the design of (regional) electricity markets, the weighting of uniform pricing with re-dispatch on the one hand and zonal or even nodal pricing on the other hand largely depends on the trade-off between price signals, short and long-term incentives, liquidity and competition. The combination of the said aspects determines the overall efficiency of a market design and its congestion management. The thesis at hand addresses itself to various aspects of the described trade-off. With regard to the European context, the thesis presents a methodology to identify suitable bidding zones under consideration of the fundamental market structure. Furthermore, the static and dynamic efficiency of different re-dispatch designs is analysed theoretically. Subsequently, the influence of congestion management designs on the distribution of producer and consumer surplus is quantified for the case of Germany. Additionally, the magnitude of the losses in efficiency induced by re-dispatch models is assessed

An Electricity Price Modeling Framework for Renewable-Dominant Markets

Renewables introduce new weather-induced patterns and risks for market participants active in the energy commodity sector. We present a flexible framework for power spot prices that is capable of incorporating a weather model for the joint distribution of local weather conditions. This not only allows us to make use of a long history of local weather data in the calibration procedure but also makes it possible to assess how changes in the renewable generation portfolio impact the characteristics of future wholesale spot prices. Empirical tests demonstrate the model’s capability to reproduce salient features of market variables. We furthermore show why our model offers unique benefits for market players compared to existing approaches

A Review of the Monitoring of Market Power The Possible Roles of TSOs in Monitoring for Market Power Issues in Congested Transmission Systems

The paper surveys the literature and publicly available information on market power monitoring in electricity wholesale markets. After briefly reviewing definitions, strategies and methods of mitigating market power we examine the various methods of detecting market power that have been employed by academics and market monitors/regulators. These techniques include structural and behavioural indices and analysis as well as various simulation approaches. The applications of these tools range from spot market mitigation and congestion management through to long-term market design assessment and merger decisions. Various market-power monitoring units already track market behaviour and produce indices. Our survey shows that these units collect a large amount of data from various market participants and we identify the crucial role of the transmission system operators with their access to dispatch and system information. Easily accessible and comprehensive data supports effective market power monitoring and facilitates market design evaluation. The discretion required for effective market monitoring is facilitated by institutional independence.Electricity, liberalisation, market power, regulation