A revenue sensitivity approach for the identification and quantification of market power in electric energy markets

In this paper we present a practical approach for identifying and measuring market power in an electric energy market. To do so we determine which participants or groups of participants have the ability to increase their own revenues without affecting the rest of the market, and then apply a relative measure to quantify the extent of market power exploitation. We present a 30-bus, 6-generator example in which two generators in a load pocket are found to have and use market power. Using price and revenue signals from a repeated auction, we explain how these generators learn to exploit their power over time. Experimental results are also presented and analyzed.