An empirical method of dynamic oligopoly behavior analysis in electricity markets

Evidence of market power existing in the electricity markets has been empirically revealed, but the understanding of the market structure and generation companies´ (GENCOs´) strategic behaviors underlying the market power is far from satisfactory. This paper presents a theory and method for estimating the conjectural variations of GENCOs. Based on these estimates of conjectural variations in an actual electricity market, an empirical methodology is also proposed to analyze the dynamic oligopoly behaviors underlying market power. This is not only useful for system regulators to analyze the market structure but also to recognize and control the market power accordingly. The Australia National Electricity Market is used as the simulation case to test the proposed method.