Modeling and analysis of a decentralized electricity market: an integrated simulation / optimization approach

Abstract

In this study, it is aimed to investigate electricity market restructuring and deregulation and understand the implications of a competitive power market based on hourly biddings. An alternating current (AC) transmission network with line capacity and production technology based constraints formed a basis for the analysis of electricity prices, availability and supply security. For this purpose an agent based simulation model (to mimic and oversee the biddings) and a nonlinear network flow optimization model (to oversee and optimize the electricity flows, while enforcing supply, demand, capacity and other technological constraints) are developed and integrated. The model is designed such that it can be used for market design as well as investment planning, being capable to identify the most appropriate electricity production technology, size, and region. The transmission network, on which the scenario analysis are carried out, includes 30 bus, 41 transmission lines, nine generators, and 21 power users. The scenarios examined in the analysis covers various settings of transmission line capacities, transmission fees, hourly learning algorithms, structural changes such as shift of demand between nodes, introduction of new generator to selected nodes and their combinations. Results provide insight into key behavioral and structural aspects of a decentralized electricity market under network constraints.