Toward Designing Value Supportive Infrastructure for Electricity Trading

The recent deregulation process of the electric power industry in Japan motivates formulating a new kind of models for designing e-commerce-oriented infrastructure with a real-time electronic trading system at its core in the Internet environment. This paper aims at presenting an elemental market-based model of the wholesale electricity trading. The model is to expected to provide building blocks for studying the interactions between elements of market design and various market forces. It is, also, intended to facilitate the assessment of alternative policies for forming the regulatory rules of trading. We view the electric power network as a platform on which trading games by generating firms, energy users and the system operator take place. Economic values of transmission grid-resources will be priced from the framework of how these resources are to be shared by the competing market participants seeking benefits of their own. The phenomena of the market splits, emergence of different prices within a linked system of sub-markets, are modeled and derived as part of the equilibrium. The model will also help the infrastructure planner identify various resource bottlenecks in the present system and formulate strategy for future development.