Market Power Analysis in Deregulated Electricity Markets using AC Power Flow Models

Market power assessment is a prime concern when designing a deregulated electricity market. In this paper, we propose a new functional market power measure, termed transmission constrained network flow TCNF , that takes into account an AC model of the network. The measure unifies three large classes of long-term transmission constrained market power indices in the literature: residual supply based, network flow based, and minimal generation based. Furthermore it is built upon the recent advances in semidefinite relaxations of AC power flow equations to model the underlying power network. Previously, market power measure that took into account the network did so via DC approximations of power flow models. Our results highlight that using the more accurate AC model can yield fundamentally different conclusions both about whether market power exists and about which generators can exploit market power.