Greek wholesale electricity market: Forthcoming market changes and bid/cost recovery

The Greek wholesale electricity market is based on a day-ahead unit commitment market clearing and generation dispatch formulation with co-optimization of energy and reserves without the participation of transmission. An important feature of the market design is the cost recovery mechanism, which explicitly compensates generation units for their commitment costs and guarantees a minimum profit equal to 10% of their variable costs. In this paper, we evaluate the current mechanism in comparison to an alternative bid/cost recovery mechanism by simulating the wholesale electricity market for a period of one year. As part of the study we take into account the forthcoming changes for the liberalization of the Greek market that include the physical and virtual sale of a portion of PPC lignite plants, and we examine a likely "business as usual" scenario concerning the resulting bidding strategies. Lastly, we perform a sensitivity analysis with respect to the hydro production and the carbon price.