Skip to main content
SpringerLink
Log in

Counterexamples to Commonly Held Assumptions on Unit Commitment and Market Power Assessment

  • Chapter
  • First Online:
Engineering IT-Enabled Sustainable Electricity Services

Part of the book series: Power Electronics and Power Systems ((PEPS,volume 30))

Abstract

This chapter revisits two commonly accepted assumptions about the economics of deregulated electricity markets. It first disproves that, in theory and under the condition of perfect information, decentralized and centralized unit commitment (UC) would lead to the same power quantities traded and the same optimal social welfare. It then shows that a generator owner’s optimum bid sequence for an auction market is generally above marginal cost, even where absolutely no abuse of market power is involved.

This is a preview of subscription content, log in via an institution to check access.

Access this chapter

Log in via an institution
Chapter
USD 29.95
Price excludes VAT (USA)
  • Available as PDF
  • Read on any device
  • Instant download
  • Own it forever
eBook
USD 189.00
Price excludes VAT (USA)
  • Available as EPUB and PDF
  • Read on any device
  • Instant download
  • Own it forever
Hardcover Book
USD 249.99
Price excludes VAT (USA)
  • Durable hardcover edition
  • Dispatched in 3 to 5 business days
  • Free shipping worldwide - see info

Tax calculation will be finalised at checkout

Purchases are for personal use only

Institutional subscriptions

Similar content being viewed by others

Notes

  1. 1.

    This result concerns short-term supply optimization for a given demand and does not consider long-term investment issues.

References

  1. M.D. Ilić, F. Galiana, L. Fink (eds.), Electric Power Systems Restructuring: Engineering and Economics (Kluwer, Dordrecht, 1998)

    Google Scholar 

  2. W. Gatterbauer, M.D. Ilić, Counterexamples to commonly held assumptions on unit commitment and market power assessment, in Proceedings of the 34th Annual North American Power Symposium (NAPS 2002) (IEEE, New York, 2002), pp. 219–225

    Google Scholar 

  3. W. Gatterbauer, Interdependencies of electricity market characteristics and bidding strategies of power producers, Master’s thesis, Massachusetts Institute of Technology, May 2002

    Google Scholar 

  4. J.B. Klein, The use of heat rates in production cost modeling and market modeling, Electricity Analysis Office, California Energy Commission, April 1998

    Google Scholar 

  5. G. Hardin, The tragedy of the commons. Science 162(3859), 1243–1248 (1968)

    Article  Google Scholar 

  6. D. Braess, Über ein Paradoxon aus der Verkehrsplanung. Unternehmensforschung 12, 258–268 (1969)

    MathSciNet  Google Scholar 

  7. J.E. Cohen, F.P. Kelly, A paradox of congestion in a queueing network. J. Appl. Probab. 27, 730–734 (1990)

    Article  MathSciNet  MATH  Google Scholar 

  8. F. Wu, P. Varaiya, P. Spiller, S. Oren, Folk theorems on transmission access: Proofs and counterexamples. J. Regul. Econ. 10(1), 5–23 (1996)

    Article  Google Scholar 

  9. C.J. Day, B.F. Hobbs, J.-S. Pang, Oligopolistic competition in power networks: A conjectured supply function approach. IEEE Trans. Power Syst. 17, 597–607 (2002)

    Article  Google Scholar 

  10. J. Chandley, A standard market design for regional transmission organizations. Electricity J. 14(10), 27–53 (2001)

    Article  Google Scholar 

  11. R.P. O’Neill, U. Helman, P.M. Sotkiewicz, M.H. Rothkopf, W.R. Stewart, Regulatory evolution, market design, and unit commitment, in The Next Generation of Unit Commitment Models. International Series in Operations Research and Management Science (Kluwer, Dordrecht, 2001)

    Google Scholar 

  12. R.D. Tabors, Unbundling of transmission: The operation and economics of a for-profit transmission company, 33rd Hawaii International Conference on System Sciences (HICSS). IEEE Computer Society, Maui, Hawaii, vol. 4 (2000), p. 4034

    Google Scholar 

  13. E. Allen, M.D. Ilić, Price-Based Commitment Decisions in the Electricity Market. Advances in Industrial Control (Springer, Berlin, 1999)

    Google Scholar 

  14. D.O.E. Energy Information Administration, Electricity prices in a competitive environment: Marginal cost pricing of generation services and financial status of electric utilities, August 1997, DOE/EIA-0614. ftp://ftp.eia.doe.gov/electricity/0614.pdf

  15. S. Borenstein, J.B. Bushnell, F.A. Wolak, Measuring market inefficiencies in California’s restructured wholesale electricity market. Am. Econ. Rev. 92(5), 1376–1405 (2002)

    Article  Google Scholar 

Download references

Acknowledgments

This work was partially supported by a Rotary Ambassadorial Scholarship, a fellowship from the MIT graduate student office, a DOC scholarship from the Austrian Academy of Sciences, and by NSF IIS-0915054.

Author information

Authors and Affiliations

  1. Tepper School of Business, Carnegie Mellon University, 5000 Forbes Avenue, Pittsburgh, USA

    Wolfgang Gatterbauer

  2. Department of Electrical and Computer Engineering, Carnegie Mellon University, 5000 Forbes Ave, Pittsburgh, PA, 15213, USA

    Marija Ilić

Authors
  1. Wolfgang Gatterbauer
    View author publications

    You can also search for this author in PubMed Google Scholar

  2. Marija Ilić
    View author publications

    You can also search for this author in PubMed Google Scholar

Corresponding author

Correspondence to Wolfgang Gatterbauer .

Editor information

Editors and Affiliations

  1. , Electrical and Computer Engineering (ECE, Carnegie Mellon University, Porter Hall B25, Pittsburgh, 15213-3890, Pennsylvania, USA

    Marija Ilic

  2. , Dept. of Electrical and Comp. Eng., Texas A&M University, College Station, 77843, Texas, USA

    Le Xie

  3. Carnegie Mellon University, 5000 Forbes Ave, Porter Hall B10, Pittsburgh, 15213, Pennsylvania, USA

    Qixing Liu

Rights and permissions

Reprints and permissions

Copyright information

© 2013 Springer Science+Business Media New York

About this chapter

Cite this chapter

Gatterbauer, W., Ilić, M. (2013). Counterexamples to Commonly Held Assumptions on Unit Commitment and Market Power Assessment. In: Ilic, M., Xie, L., Liu, Q. (eds) Engineering IT-Enabled Sustainable Electricity Services. Power Electronics and Power Systems, vol 30. Springer, Boston, MA. https://doi.org/10.1007/978-0-387-09736-7_10

Download citation

  • DOI: https://doi.org/10.1007/978-0-387-09736-7_10

  • Published:

  • Publisher Name: Springer, Boston, MA

  • Print ISBN: 978-0-387-09735-0

  • Online ISBN: 978-0-387-09736-7

  • eBook Packages: EngineeringEngineering (R0)

Publish with us

Policies and ethics

Search

Navigation