Game Theory and its Impact on Economic Profit in the Electric Power Market

Authors

Keywords:

Game Theory, Bilivel Programming, Market Power, Economic Dispatch, Nash Equilibrium

Abstract

Due to the creation of electricity markets, which are characterized by the competitiveness among participants, particularly in the generation of electric energy, this led to a considerable increase in the number of energy producers. However, in order to maximize their profit, some of them submit their bids beyond competitive prices, incurring in some irregularities in the market. Therefore, this paper analyzes the participants’ strategy using game theory, because the electricity market is a conflict scenario, in which participants’ interests are at play. For this purpose, a bilevel optimization model was employed, incorporating a cooperative game theory methodology known as incomplete information gaming, which maximizes the profit of the producers through an optimal strategy and minimizes the system’s operating costs. The results obtained in this paper show that, using the game methodology, it is possible to achieve a positive impact on participants’ profit. However, it is necessary for the participants to be rational and logical when they make their bids. Moreover, the results indicate that this methodology can be used to identify irregularities in the market, such as market manipulation and market power indicators in the participants.

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Author Biographies

Jose Antonio Marquez Diaz, INSTITUTO POLITECNICO NACIONAL- SEPI ESIME ZAC.

He graduated in Electrical Engineering at Instituto Politécnico Nacional in 2019 and he obtained his master of science degree in Electrical Engineering at SEPI, ESIME, IPN in 2021. His research areas include Energy Markets, Optimization in Electric Power Systems and Game Theory.

Mohamed Badaoui, INSTITUTO POLITECNICO NACIONAL- ESIME ZAC.

Bachelor in Mathematical Sciences at Mohamed I University in 1998. Master of Science in Mathematics at ESFM-IPN in 2003 and PhD in Mathematical Sciences at FC-UNAM in 2012. He is currently a professor at SEPI, ESIME, IPN in Mexico. His areas of interest include Financial Mathematics, Risk Theory and Mathematical Modeling in Electrical Power Systems.

David Sebastián Baltazar, INSTITUTO POLITECNICO NACIONAL- ESIME ZAC.

He received the bachelor degree of Industrial Engineer in Electrical Engineering at Instituto Tecnológico de Morelia, Mexico in 1990, his master and PhD's degree in Electrical Engineering at SEPI, ESIME, IPN, Mexico in 1993 and 1999, respectively. He is currently a professor at SEPI, ESIME, IPN in Mexico. His research areas include Electrical Power Systems Protection and Energy Markets.

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Published

2022-06-03

How to Cite

Marquez Diaz, J. A., Badaoui, M., & Sebastián Baltazar, D. (2022). Game Theory and its Impact on Economic Profit in the Electric Power Market. IEEE Latin America Transactions, 100(XXX). Retrieved from https://latamt.ieeer9.org/index.php/transactions/article/view/6372

Issue

Section

Electric Energy

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