Impacts of network constraints on electricity market equilibrium

Nash equilibrium is usually used as the solution of generator's strategic bidding in electricity markets. The available literatures have demonstrated by simulation that multiple market equilibria or no pure equilibrium may be induced with the inclusion of network constraints (e.g. transmission constraints). This paper presents a systematical analysis of the impacts of network constraints on the market equilibrium in oligopolistic electricity markets. In our modeling, the ISO dispatches generation and determines nodal prices via solving an OPF problem, and the individual generator optimizes its supply function with Nash-Cournot strategy, after taking into account of the ISO's decision making process on dispatched generation and nodal prices. The conditions for the existence of equilibrium are given, and it is shown that there may be multiple equilibria; and the equilibrium, if exists, will be at a point where generators pay no congestion charge.