Electricity Market: Mastering Competition through a Simulation

In the past twenty years, the energy sectors of many countries have gone through major changes. A large portion of these countries underwent unbundling of vertically integrated national utilities (i.e. the break-up between Generation, Transmission and Distribution and Supply). Others, influenced by various drivers, decided to liberalize entry in the generation and supply parts of the industry by introducing competition. In parallel, other countries still have parts if not their entire energy industry privatized. This seminar focuses on competition and strategic behavior. Such concepts are important to help participants understand how the market price is formed, often at a higher level than the marginal cost of producing electricity. Strategic behavior is complex and subject to numerous factors such as market organizations, demand and engineering factors. In order to better understand market prices, its creation and strategic behaviour, this seminar presents a teaching tool developed to understand electricity market operations and supply bidding in a simulated market with a simple market clearing mechanism. This game will allow participants to evolve in an environment where they will not only make trading decisions, but also investment decisions.

Through this simulation and the analysis of results, participants gain the essential strategic skills in competitive electricity markets.

Worldwide experiences of competitive electricity markets are also discussed, and an introduction to transmission pricing and transmission congestion rights is presented.

 
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