Congestion management games in electricity markets

Arbeitspapier

This paper proposes a game-theoretic model to analyze the strategic behavior of inc-dec gaming in market-based congestion management (redispatch). We extend existing models by considering incomplete information about competitors' costs and a finite set of providers. We find that these extensions do not dissolve inc-dec gaming, which already occurs in our setup of two regions. We also benchmark market-based redispatch against grid investment, cost-based redispatch, and the Vickrey-Clarke-Groves mechanism. The comparison highlights a significant inefficiency of market-based redispatch and inflated redispatch payments. Finally, we study seven variations of our basic model to assess whether different market fundamentals or market design changes mitigate inc-dec gaming. None of these variations eliminate inc-dec gaming entirely.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: ZEW Discussion Papers ; No. 22-060

Classification and Topics

• Classification: Wirtschaft ; Market Structure, Pricing, and Design: Oligopoly and Other Forms of Market Imperfection ; Auctions ; Oligopoly and Other Imperfect Markets ; Energy: Demand and Supply; Prices ; Energy: Government Policy
• Subject: Energy market ; Game theory ; Auctions/bidding ; Congestion management ; Inc-dec gaming

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Ehrhart, Karl-Martin ; Eicke, Anselm ; Hirth, Lion ; Ocker, Fabian ; Ott, Marion ; Schlecht, Ingmar ; Wang, Runxi
• Event: Veröffentlichung
• (who): ZEW - Leibniz-Zentrum für Europäische Wirtschaftsforschung
• (where): Mannheim
• (when): 2022

Further information

• Handle: http://hdl.handle.net/10419/266651
• Last update: 10.03.2025, 11:46 AM CET