Market power and welfare effects in DC power flow electricity models with thermal line losses [An article from: Decision Support Systems]

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Description:
A nodal electric power network with Cournot-Nash interaction among power generators is formulated as a mixed complementarity problem. The model incorporates a direct current (DC) power flow approximation with thermal line losses to model real-time flows. We include constant wheeling rate and variable congestion charges for transmission of electricity. Market power and welfare effects are measured in an aggregated Indiana electric grid model. We find that imposing DC power flow constraints in a model results in significant changes in social welfare estimates. Line losses are also an important factor affecting market power and welfare of market participants in the case study.