I. INTRODUCTION
In the recent past, many countries have restructured the
electricity industries by opening energy markets,
unbundling the electricity services and opening the access
to electrical networks. It is deemed that more options and
freedom to the market participants may stimulate the
competition in power trading, in order to achieve lower
power prices, the improvement of system efficiency and
incentives to innovation [1-6].
Every country has developed its own deregulated electric
power market model in accordance with its socioeconomic
and political needs. The degree of competition in electricity
industry consequently depends by local political choices
and influences the effective restructuring process.
Many deregulated power markets are based on a pooloperation structure which includes two separate entities: the
Power Exchange (PX) and the Independent System
Operator (ISO) [7]. The PX and the ISO are independent
and no-profit organizations with no commercial interest in
the market.
In general, the PX directly operates wholesale energy
markets, such as day-ahead and hour-ahead markets, while
the real-time market for energy balancing and the market
for the ancillary services may be operated directly by the
ISO or by PX on behalf of ISO and under specific technical
requirements.
The ISO controls and operates the transmission grid and
facilitates transactions and transmission avoiding influence
on the generation schedules created by the PX.
The Power pool has developed as one of the most
acceptable ways to organize power trading in electricity
market. The pools for trading are not identical. They are
either optional (Argentina) or mandatory (UK, Australia,
Italy), either single-side bidding (UK) or double side
bidding (Norway, New Zealand, Italy), etc.
This paper is concerned with a simulation tool able to
analyze, for a compulsory PX/ISO structure, the day-ahead
energy market based on a double-side auction scheme. In
this case, both power suppliers and customers are allowed
to submit energy-price bidding curves. The supply and
demand bid curves are then aggregated by the PX to obtain
the cumulative sales and purchases curves.
The intersection point of these curves determines the
wholesale energy price, i.e. the Market Clearing Price
(MCP), and correspondently the total Cleared Power (CP).
The power to be awarded to each bidder is then determined
and all the power awards will be compensated at the MCP
[8].
The proposed tool allows the simulation of the day-ahead
market in the presence of generating companies (Gencos)
with different types of generating units. For each thermal
unit and in dependence of the considered fuel mix, the
production cost curve is considered and a specific bid curve
can be assumed.
It is supposed that each supply bid is composed by one or
more quantity/price pairs for each hour, to form a non
decreasing multi-stage bid curve. An analogous scheme is
adopted for purchase offers. In this case a non increasing
multi-stage bid curve is considered for each customer.
The simulation tool allows the analysis of several crucial
aspects of the wholesale energy market. In fact, the MCP
can vary in dependence on various factors: actual
generation technologies, fuel costs and fuel mix, repowering policies, etc.. Moreover, although the MCP
concept should guarantee the maximum social welfare, the
participants may put into action market-power strategies
and then influence the correct competition. At the same
time, competition reduces when a small number of firms
access to the market [9-11].
This paper is organized as follows. In the Section II the
Italian electricity market is described according to the EU
Directive 96/92 [12] which has been implemented by the
legislative decree no. 79/99 [13]. In the Section III a
mathematical formulation of the day-ahead market model is
illustrated. In Section IV, using published and estimated
data, the Italian wholesale energy market is investigated.
Results show how MCP, profit and market share may be
significantly influenced by Gencos strategies and technical
and economical inputs.
89
Distributors
Franchised
customers
Demand
Bid
Independent
System Operator
(ISO)
Supply
Bid
Day ahead
market
Demand
Bid
Renewable
energy plants
Supply
Bid
Bilateral contracts
Eligible
Customers
Power
Companies
(Gencos)
Plants with
bilateral
contracts
90
Must-run plants
BMW(i,j) > 0
(9)
the MCP can be evaluated as the average value between
p s and p c [8]. It should be pointed out that analogous
L
j
ST
iB jST
iG jST
s.t.
iG jST
iL jST
iB jST
i G
0 GMW(i, j ) QG(i, j )
j ST
i L
0 LMW(i, j ) QL(i, j)
j ST
0
(2)
price
(a)
MCP
demand bid
CP
price
(3)
MCP
demand bid
Power
CP
price
(c)
jST
PBi =
LMW (i, j)
iL
BMW (i, j)
i B
Power
(b)
supply bid
i B
0 BMW(i, j ) QB(i, j )
j ST
where GMW(i,j), LMW(i,j) and BMW(i,j) are the unknown
variables. Solving the problem (1) with the constraints (2)
and (3) the following generation/load scheduling is
obtained:
PGi = GMW (i, j )
i G
PLi =
supply bid
(4)
jST
supply bid
MCP
demand bid
jST
CP
price
where PGi , PLi and PBi are the actual powers assigned to
the each market participant.
By considering the following two energy prices:
p s = max[GP(i, j )]
Power
(d)
supply bid
MCP
(5)
s.t.
demand bid
GMW(i,j) > 0
(6)
and
CP
Power
(7)
s.t.
LMW(i,j) > 0
(8)
91
Genco
Generating units
type
MW
H
8139
T
20289
GT
698
CC
326
H
394
T
5739
H
1012
T
4350
H
1333
T
2229
CC
906
H
63
T
2562
H
120
T
321
n.
92
53
8
4
3
22
3
17
35
14
18
1
10
---
EPR
EUR
ELE
ITA
INT
OTH
29452
6133
5362
4468
2625
441
100
80
demand-curve
60
40
supply-curve
20
0
0
10000
20000
30000
MW
40000
50000
60000
Fig. 3. The aggregated supply- and demand-curve for the base case
92
MW
120
/MWh
TABLE II
BASE CASE: PROFIT, MARKET SHARE AND SCHEDULED POWER
Dispatched Power
Market
Profit
Share
Genco
H
T
GT
CC
Total
[/MW]
[%]
EPR
12,5
56.6
EUR
3,5
9.8
69.4
10,5
8.7
1012
2790
--
--
3802
70.9
26,6
7.9
1333
1221
--
906
3460
77.4
INT
1,7
4.1
63
1732
--
--
1795
68.4
OTH
11.6
0.8
119
225
--
--
344
78.1
100.
0
12.0
--
5265
(c)
60
(b)
55
(a)
/MWh
50
base case
45
40
35
30
25
5000
10000
15000
20000
25000
30000
35000
MW
Genco
[]
[]
EPR
36.07
3.77
37.16
6.90
38.22
9.95
35.29
1.52
35.45
1.99
35.76
2.88
ELE
35.05
0.83
35.31
1.58
35.40
1.84
ITA
34.60
-0.46
34.60
-0.46
34.76
0.00
INT
34.60
-0.46
35.19
1.24
35.23
1.35
OTH
34.76
0.00
34.76
0.00
34.76
0.00
All Gencos
37.18
6.96
39.25
12.92
42.06
21.00
ITA
INT
OTH
All
EPR
19.1
4.5
4.2
-1.0
3.6
0.0
35.6
26.7
40.0
0.0
0.0
6.7
0.0
133.3
ELE
15.0
5.0
10.0
-2.5
5.0
0.0
42.5
ITA
8.7
2.2
2.2
-1.1
1.1
0.0
17.4
INT
66.7
0.0
0.0
0.0
66.7
66.7
300.0
OTH
25.0
0.0
0.0
0.0
0.0
-25.0
50.0
Supply curve
EPR
EUR
ELE
ITA
INT
OTH
All
EPR
-17.5
4.2
1.9
0.0
1.8
0.0
-2.7
EUR
41.8
-39.8
8.2
1.0
5.1
1.0
1.0
ELE
31.0
6.9
-32.2
0.0
1.1
0.0
3.4
ITA
12.7
2.5
2.5
-2.5
2.5
0.0
8.9
INT
46.3
14.6
14.6
2.4
-46.3
0.0
4.9
OTH
25.0
12.5
12.5
0.0
12.5
-25.0
25.0
EUR
ELE
ITA
INT
All
EPR
1.06
0.48
0.08
0.44
0.00
-1.00
EUR
-13.84
91.71
5.56
5.56
5.56
66.96
ELE
-4.39
1.22
24.12
1.22
0.32
14.34
ITA
-4.45
0.00
0.00
5.09
0.00
-1.66
-0.05
180.8
4
141.25
INT
EUR
ELE
EUR
Genco
(c)
[]
EUR
TABLE V
STRATEGIC BIDS: PERCENT VARIATION OF MARKET SHARE
Supply curve
EPR
84.4
ELE
17.3
Genco
[%]
ITA
ITC
TABLE IV
STRATEGIC BIDS: PERCENT VARIATION OF PROFIT
-42.93
-0.05
-0.05
93
TABLE VII
RENEWABLE S IMPACT: PERCENT VARIATION OF PROFIT AND MARKET
SHARE
Genco
EPR
-3.8
-3.2
-7.7
-6.2
-9.0
-11.3
EUR
-5.5
-12.2
-8.0
-24.2
-7.9
-32.0
ELE
-2.5
-10.4
-3.7
-21.0
-4.3
-27.4
ITA
-2.2
-2.4
-4.4
-4.1
-5.5
-4.6
INT
-23.5
-9.2
-29.4
-22.8
-27.0
-30.2
OTH
-4.8
-9.4
-4.1
-18.7
-5.9
-18.8
ITC
-3.3
0.0
-6.9
0.0
-8.6
-0.1
EPR
/MW
36.55
5.16
310564
0.21
49.86
-12.0
EUR
35.60
2.41
14920
-0.33
5.02
-48.6
ELE
35.28
1.49
40401
1.20
6.13
-29.5
ITA
34.76
0.00
89820
-2.41
7.90
0.0
INT
35.23
1.35
2427
-20.47
1.90
-53.7
All Gencos
37.70
8.46
490402
6.63
--
V. CONCLUSIONS
A simulation tool for investigating the day-ahead energy
market in a compulsory PX/ISO structure has been
developed. Sale- and purchases offers have been
represented by price-quantity multi-stage curves. In
addition, the presence of a Single-Buyer entity has been
considered to represent franchised customers.
The tool allows the analysis of the volatility of the MCP
as a consequence of different factors: actual generation
technologies, fuel costs and fuel mix, re-powering policies,
etc.. The effects of strategies that participants may put into
action to influence the correct competition can be also
investigated.
The procedure has been applied to the Italian wholesale
market which has been represented in detail with the
generation set the present Gencos. The results have
revealed how MCP, profit and market share can vary
significantly according with Gencos strategies and
technical and economical inputs.
VII. BIOGRAPHIES
Maria Dicorato was born in Cerignola, Italy, in 1969. She received the
degree in Electrical Engineering from the Politecnico di Bari (Italy) in 1997.
She received her Ph.D. in Electrical Engineering from the Politecnico of Bari
in 2001. She is Member of the IEEE PES and A.E.I.
Anna Minoia was born in Conversano, Italy, in 1977. She received the
degree in Electrical Engineering from the Politecnico di Bari (Italy) in 2001.
She is currently working at Politecnico di Bari. She is Student Member of the
IEEE PES and AEI.
Roberto Sbrizzai was born in Bari, Italy, in 1962. he received the degree in
Electrical Engineering from University of Bari (Italy) in 1986. in 1992 he
received his Ph.D. in Electrical Engineering from the Politecnico di Bari. He
is currently Associate Professor at the Electrical and Electronic Engineering
Department of the Politecnico di Bari.
Michele Trovato was born in Bitonto, Italy, in 1953. He received the degree
in Electrical Engineering in 1979 from University of Bari. In 1980, he joined
the Electrical Engineering Institute of the University of Bari, where he became
Associate Professor of Transmission and Distribution Systems. He is currently
full professor of Electrical Energy Systems at the Electrical and Electronic
Engineering Department of the Politecnico di Bari. His areas of interest are
power system analysis and control. He is member of the IEEE PES and A.E.I.
VI. REFERENCES
[1] L. Philipson and H. Lee Willis, Understanding Electric
Utilities and Deregulation, Marcel Dekker Inc., 1999.
[2] H. Chao and H.G. Huntington, Designing competitive
electricity market, Kluwer Academic Publishers, 1998.
[3] S. Hunt and G. Shuttleworth, Competition and choice in
Electricity, Wiley, 1996.
94