Electricity Market Dynamic Game Modeling based on Water Resource Constraint

In this paper, a duopoly market considered which consist of a hydro power plant and a thermal power plant. Market study demonstrates although hydro power marginal cost is lower according to thermal power, but reservoir water limitation, causes to the thermal power generator becomes monopole in some situation, thus market power let to governing clearing price, that motivate thermal plant for long-term investing. On the other hand, hydro unit is more useful for short-term price smoothing and withholding water in normal condition is the hydro generator strategic decision. This study can be used by ISO to choose the proper power source for maximization of social surplus.

Keywords:

Hydro Power , Thermal Power , Game Theory , Cournot Duopoly , Bidding Strategy , Energy Resource constraints