A Dynamic Oligopolistic Electricity Market Model with Interdependent Segments

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We propose a deterministic, discrete-time, finite-horizon oligopoly model to investigate investment and production equilibrium strategies, in a setting where demand evolves overtime and the two market segment loads (peak- and base-load) are interdependent. The players (generators) compete à la Cournot and open-loop Nash equilibria are computed and numerical results are discussed. The model is calibrated with data from Ontario, Canada. We assess the impact on equilibrium strategies of a generation sector with more market power than what is the actual situation. We also analyze the impact of increasing demand elasticities overtime, and varying the financial values of production capacities remaining at the end of the planning horizon. We believe that such a tool is valuable for professionals and scholars interested in the dynamics of production capacity mix (portfolio of technologies) in the electricity sector. It is also of paramount importance for public decision makers who have to deal simultaneously with environmental and control price issues, which are politically sensitive.

, 25 pages

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A dynamic oligopolistic electricity market model with interdependent segments
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Energy Journal, 32(4), 183–217, 2011 BibTeX reference