An Application of the Energy and Transmission Price Conjecture in an Oligopolistic Power Market

In network-constrained electricity market models of oligopolistic competition among power producers, strategically behaving generators are likely to manipulate prices in the energy and transmission market in order to gain higher profits. As for the energy market, several game theoretical approaches have been applied to represent strategic generators’ behavior. Another approach is used in this paper which needs external sensitivity parameters to be estimated known as Conjectural Variations (CV). Additionally, the strategic generators’ effect on transmission prices is taken into account by means of introducing Conjectured Transmission Price Response (CTPR) parameters. An estimation procedure of the CVand CTPRparameters will be within the scope of this paper. The results will show that a more accurate market outcome can be achieved when additionally accounting for strategic behavior in the transmission market. The overall market design forms an equilibrium model of bilateral trading with perfect arbitrage based on a point-topoint transmission pricing scheme and is formulated as a mixed linear complementarity (MLCP) problem.