Study of GenCos’ Capacity Withholding Considering Supply Function Equilibrium Model

Due to the oligopoly structure of the electricity markets, the Generation Companies (GenCos) may exert market power by employing bidding strategies such as capacity withholding. This brings the market clearing price higher and the quantity generated of the market lower. In this paper capacity withholding in an oligopolistic electricity market that all GenCos bid in the SFE model is analyzed and the capacity withheld index, the capacity distortion index and the price distortion index are formulated. Demand elasticity can significantly affect the GenCos’ capacity withholding in the market. The potential ability of market for capacity withholding is measured by the Distortion- Withheld Index (DWI) that it proposed in this paper. The finding in this paper is helpful for market power monitoring and mitigating.

Keywords:

Capacity withholding , Supply function equilibrium (SFE) , Demand elasticity