Modeling supply function equilibrium in electricity markets: An MCP approach

Abstract

The international organization of the electrical industry experimented very important changes after the deregulation of the electrical market. Companies have higher responsibilities and risks in the decision process of electrical generation. Nowadays, the competitors in this sector are increasing; therefore, an optimal production in order to get the maximum profit is much more important. New models and tools, which are able to adjust to the new necessities, are required. In this article, a new method to solve the market equilibrium is presented. The study is based on the supply function approach. Supplies functions, relating price and quantity, can be chosen by the generation companies in order to adapt their production better to the uncertain demand. GAMS is the tool used in order to program optimizations of the supply functions for each company.