Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/183437 
Authors: 
Year of Publication: 
2018
Series/Report no.: 
IFN Working Paper No. 1208
Publisher: 
Research Institute of Industrial Economics (IFN), Stockholm
Abstract: 
Competition between oligopolist electricity generators is inhibited by transmission constraints. I present a supply function equilibrium (SFE) model of an electricity market with a single lossless, but constrained, transmission line. The market admits equilibria in which generator withhold energy in order to induce congestion, which further increases their local market power. Under appropriate assumptions on cost and demand functions, I obtain a planar autonomous system of ordinary differential equations for the SFE. Computational methods are developed to solve the system while respecting monotonicity constraints on the supply functions. Using these methods I can calculate SFE in network markets that range from fully isolated to fully integrated. I also find network markets for which the SFE is not unique.
Subjects: 
Supply function equilibrium
Electricity markets
Market power
Locational pricing of electricity
JEL: 
C62
C65
D43
L13
L94
Document Type: 
Working Paper

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