Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/183440 
Year of Publication: 
2018
Series/Report no.: 
IFN Working Paper No. 1211
Publisher: 
Research Institute of Industrial Economics (IFN), Stockholm
Abstract: 
Zonal pricing with countertrading (a market-based redispatch) gives arbitrage opportunities to the power producers located in the export-constrained nodes. They can increase their profit by increasing the output in the dayahead market and decrease it in the real-time market (the inc-dec game). We show that this leads to large inefficiencies in a standard zonal market. We also show how the inefficiencies can be significantly mitigated by changing the design of the real-time market. We consider a two-stage game with oligopoly producers, wind-power shocks and real-time shocks. The game is formulated as a two-stage stochastic equilibrium problem with equilibrium constraints (EPEC), which we recast into a two-stage stochastic Mixed-Integer Bilinear Program (MIBLP). We present numerical results for a six-node and the IEEE 24-node system.
Subjects: 
Two-stage game
Zonal pricing
Wholesale electricity market
Bilinear programming
JEL: 
C61
C63
C72
D43
D47
L13
L94
Document Type: 
Working Paper

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