Behavior of power plants in collusion and competitive markets considering external costs

TL;DR

This paper models power plant behavior in collusion and competitive markets considering external costs, showing external costs reduce production and profits, especially for poorer equipment, and promote greener fuel use.

Contribution

It introduces a mathematical model combined with meta-heuristics to analyze power plant strategies under external costs in different market structures.

Findings

External costs decrease power plant production and profits.

High-quality equipment is less affected by external costs.

External costs encourage greener fuel adoption.

Abstract

In this paper, a mathematical model is proposed to optimize the production level of Power Plants (PPs) in collusion and competitive markets and in the presence of external costs. To evaluate the model, two meta-heuristics, such as Genetic Algorithm (GA), and Particle Swarm Optimization (PSO), are proposed. A numerical example is studied to assess the behavior of PPs in the presence of external costs. According to the computational results, the increment in the external costs will decrease the production level and profit of all PPs in both collusion and competitive markets. But the computational results show that the effect of increment in the external costs on the PPs with high-quality equipment is less compared to the PPs with poor equipment. Moreover, the increment in the external costs will force PPs to use greener fuel resources instead of fossil fuel.