Scandinavian Working Papers in Economics

Working Paper Series,
Research Institute of Industrial Economics

No 1254: Increase-Decrease Game under Imperfect Competition in Two-stage Zonal Power Markets –​ Part II: Solution Algorithm

Mahir Sarfati (), Mohammad Reza Hesamzadeh and Pär Holmberg ()
Additional contact information
Mahir Sarfati: Research Institute of Industrial Economics (IFN), Postal: and Royal Institute of Technology (KTH), Stockholm,
Mohammad Reza Hesamzadeh: Royal Institute of Technology (KTH), Postal: Stockholm
Pär Holmberg: Research Institute of Industrial Economics (IFN), Postal: University of Cambridge and Stanford University

Abstract: In part I of this paper, we proposed a Mixed-Integer Linear Program (MILP) to analyze imperfect competition of oligopoly producers in two-stage zonal power markets. In part II of this paper, we propose a solution algorithm which decomposes the proposed MILP model into several subproblems and solve them in parallel and iteratively. Our solution algorithm reduces the solution time of the MILP model and it allows us to analyze largescale examples. To tackle the multiple Subgame Perfect Nash Equilibria (SPNE) situation, we propose a SPNE-band approach. The SPNE band is split into several subintervals and the proposed solution algorithm finds a representative SPNE in each subinterval. Each subinterval is independent from each other, so this structure enables us to use parallel computing. We also design a pre-feasibility test to identify the subintervals without SPNE. Our proposed solution algorithm and our SPNE-band approach are demonstrated on the 6-node and the modified IEEE 30-node example systems. The computational tractability of our solution algorithm is illustrated for the IEEE 118-node and 300-node systems.

Keywords: Modied Benders decomposition; Multiple Subgame Perfect Nash equilibria; Parallel computing; Wholesale electricity market; Zonal pricing

JEL-codes: C61; C63; C72; D43; L13; L94

20 pages, November 27, 2018

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