Bilateral electricity market theory based on conjectural variations equilibria

Abstract

The growth of electricity markets and evolution of electricity utility systems around the world towards a competitive environment have aroused considerable interest in the investigation of mechanisms for trading electricity, especially in such an environment that participants compete in both spot market bidding and bilateral contract trading. Equilibrium models using a Conjectural Variation (CV) approach to optimize the participants' behaviors in oligopolistic and oligopsonistic market frameworks have been represented. CV will provide the constituents of an electricity market with an expectation of how their rivals will react to their behavior changes. This paper reviews the bilateral electricity market structure, such as the UK electricity market (BETTA), analyses the conjectural equilibrium formula for both generation side and demand side markets. The paper shows how the generators and suppliers can self-dispatch and manage their contracts to meet demand in a double-sided market to reach equilibrium using a hierarchical optimization method.