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Abstract
One of the main goals of establishing electricity markets is to increase efficiency, and another is to lower the prices of electricity by ensuring competition. Protecting and improving the competitive environment of the market help in achieving these goals. If any of the generation companies in the market can exercise market power, the competition will then decrease and may even disappear. This study offers an optimization model minimizing the market power of all companies. The model can be utilized from the beginning of the liberalization of the electricity sector or during the transformation process from the monopoly to the competitive markets. It is a mixed-integer linear programming model where the bi-level structure of the problem is transformed so that the lower-level and the upper-level are combined in a single level. The lower-level model minimizes investment and production costs of companies. The upper-level maximizes the competition between all companies by minimizing market power. A numerical example is presented and discussed to test the effectiveness of the proposed model and to evaluate the results. Two scenarios are examined in which companies do and do not have budget restrictions. The results show that the model works successfully in both scenarios, and the market power of all companies is decreased so that none can distort competition. However, the second scenario, in which the state-owned company has a budget limit, is more successful in terms of satisfying not only the state and private companies but also consumers. The companies that were small at the beginning have higher shares in the second scenario and the shares of bigger companies are decreased significantly. Also, the second scenario was able to meet the investment needs from a lower level, and investments were shifted to private firms, thus saving investment expenditures of both government and private firms. Furthermore, in both scenarios, prices tend to decrease toward the target year, but the second scenario can keep prices much lower.
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This is an open access article distributed under the Creative Commons Attribution License which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.
Article Type: Research Article
EUR J SUSTAIN DEV RES, Volume 6, Issue 1, 2022, Article No: em0176
https://doi.org/10.21601/ejosdr/11409
Publication date: 07 Dec 2021
Article Views: 2600
Article Downloads: 987
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