University of Twente Student Theses
A Stochastic Bilevel Model to Study the Market Power of a Strategic Wind Power Producer in the Norwegian Auction-Based Intraday Market
Laak, W. ter (2024) A Stochastic Bilevel Model to Study the Market Power of a Strategic Wind Power Producer in the Norwegian Auction-Based Intraday Market.
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| Abstract: | The introduction of renewable energy sources to the energy mix, such as wind power, has implications for electricity markets due to its unpredictable nature. As the penetration of wind power continues to increase, the design and structure of electricity markets are put under consideration in an attempt to deal with this trend. The structure of the intraday market in Norway, in which market participants are able to re-adjust their commitment, is planned to be reformed. Multiple auction-based markets will be introduced, and the effect of this is not entirely clear. The impact of this new structure on the ability of market players, in this case, a wind power producer, to strategically influence the market will be studied in this thesis. In short, the aim of this study is to investigate under what conditions a wind power producer will be able to exercise market power. To this end, a bilevel model is developed, in which the upper level represents the profit-maximizing behaviour of the wind power producer through a multi-stage stochastic program, adjusting its bids based on uncertainty in wind forecasts and bids and offers by other market participants. The lower-level models represent the market clearing process, in which supply and demand are balanced to maximize social welfare. The balancing market, used to maintain the real-time balance between supply and demand, is also included. The prices for balancing electricity are also represented by uncertain parameters. The results demonstrate that the wind power producer is able to increase its profit by utilising strategic offering. The consequences for the market are relatively minor, as the wind power producer does not try to influence the equilibrium point to its advantage, but rather offers a higher quantity at a less favourable price. This strategy is employed in order to take advantage of expected differences in the market prices between the sequential markets, resulting in a higher trading volume and relatively large swings in its commitment to the market. Thus, although the market price changes due to this strategy, this is not necessarily due to the strategic producer exercising market power, as this would be less profitable. It does result in a lower social welfare, as the wind power producer chooses not to offer its quantity against marginal costs anymore. Ultimately, this research contributes to a better understanding of the impact of strategic offering by a wind power producer on the new proposed intraday structure, as well as the strategic interactions between multiple auction-based intraday gates. |
| Item Type: | Essay (Master) |
| Clients: | Norwegian University of Science and Technology, Trondheim, Norway |
| Faculty: | BMS: Behavioural, Management and Social Sciences |
| Subject: | 30 exact sciences in general, 31 mathematics, 50 technical science in general, 83 economics |
| Programme: | Industrial Engineering and Management MSc (60029) |
| Link to this item: | https://purl.utwente.nl/essays/102910 |
| Export this item as: | BibTeX EndNote HTML Citation Reference Manager |
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