A Discriminative Bid-Cap Setting Method for Ex Ante Market Power Regulation

Due to the oligopoly characteristics of power generation and the inelasticity of electric demand, a whole-sale electricity spot market needs a "benchmark regulation". A novel quantitative method is proposed in this paper to set bid-caps based on the residue demand analysis and the optimal bidding analysis of individual generators. The proposed method employs a discriminative framework for more efficient market regulation. The results of the case study demonstrate that the proposed method can prevent market power exercising while minimizing the interference with the market. The proposed bid-cap setting method is potentially useful for market power mitigation.