Method to Detect and Measure Potential Market Power Caused by Transmission Network Congestions on Electricity Markets

Abstract: This thesis is based on studies of the deregulated electricity markets located in the United States of America. The problem statement of the thesis evolved continuously throughout our initial period of research. Focus was finally put on monitoring and detection of potential market power caused by congestion in the transmission network. The existence of market power is a serious concern in today’s electric energy markets. A system that monitors the trading is needed and much research and many proposals on how to deal with this problem have been introduced over the years. We focus on some of these approaches and develop an approach of our own, which we call “Monopolistic Energy Calculation”. We adopt the idea to identify participants with the ability to raise prices without losing market share. An ability that should not be present on a competitive market. We take this idea further by identifying participants with the ability to make considerable price raises without losing all market shares. We propose a way to calculate the remaining market shares (Monopolistic Energy Levels) after a large price raise. These calculated levels of energy, that are only deliverable by a certain participant or by a certain group of participants, are caused by the active congestions in the network. The approach detects the amounts of these energy levels and the location in the network at which they are present. This is a prospective method if used with a prediction of the following day’s demand, which is regularly available with high accuracy. The method can also be used for monitoring purposes to identify critical situations in real-time. The method is implemented and two sets of simulations are done in which we explain and evaluate the approach. The results are promising and the correlation between “Monopolistic Energy” and market power is confirmed.