Multi-settlement systems for electricity markets: zonal aggregation under network uncertainty and market power

Abstract

We analyze alternative market designs for a multi-settlement system for electricity in which the resolution of the transmission network model is increased as time approaches real-time, and uncertainty about congestion patterns is resolved. Variations of such systems are implemented or have been proposed in California and other parts of the U.S. We aim to compare welfare implications of such market designs against more centralized single-settlement systems, such as those implemented in the Northeastern control areas of the U.S. We model the multi-settlement system as a two period game and compute subgame perfect Cournot-Nash equilibria for the various market designs.