Method to Detect and Measure Potential Market Power on Electricity Markets using the Concept of Monopolistic Energy

The existence of market power is a serious concern in modern electric energy markets. Systems and processes that monitor the trading is needed and much research and many proposals on how to deal with the problem have been introduced over the past couple of years. A challenge to all such methods is execution speed, since the identification of market power needs to be done in real-time as market prices are settled. To overcome this challenge the methods need to be simple, involving limited computational effort. This paper presents a simple method with the potential of overcoming the challenge of execution speed. The method is based on the idea of determining the participants with the ability to make considerable increases in price raises without losing all market shares. Such determination can be made in advance during day ahead trading to identify critical areas. During real-time settlement, the method can then be used in a second iteration to study the identified critical areas. In the paper we propose a way to calculate the remaining market shares after a large price raise and refer to these as Monopolistic Energy Levels. These calculated levels of energy, that are deliverable by a single certain participant or by a certain group of participants, are caused by the active congestions in the network. The method detects the quantity of these energy levels and their respective locations in the network. This is a prospective method when used with a prediction of the following days demand. The paper presents the background and development of the proposed method. The use of AC and DC power flow as means to determine the monopolistic energy levels are analyzed and discussed. The paper is concluded with examples of application of the method to a simple multi area power system.