Long-term Hydrothermal Bid-based Market Simulator

TL;DR

This paper introduces a simulation framework for long-term hydrothermal bid-based markets with strategic agents, addressing intertemporal constraints and non-convex bidding problems, demonstrated on the Brazilian power system.

Contribution

It presents a novel simulation methodology capable of modeling strategic bidding with intertemporal constraints in large-scale hydrothermal systems.

Findings

Market concentration impacts in Brazilian power system analyzed.

Contracts can mitigate market power effects.

Framework useful for policymakers and market designers.

Abstract

Simulating long-term hydrothermal bid-based markets considering strategic agents is a challenging task. The representation of strategic agents considering intertemporal constraints within a stochastic framework brings additional complexity to the already difficult single-period bilevel, thus, non-convex, optimal bidding problem. Thus, we propose a simulation methodology that effectively addresses these challenges for large-scale hydrothermal power systems. We demonstrate the effectiveness of the framework through a case study with real data from the large-scale Brazilian power system. In the case studies, we show the effects of market concentration in power systems and how contracts can be used to mitigate them. In particular, we show how market power might affect the current setting in Brazil. The developed method can strongly benefit policymakers, market monitors, and market designers as simulations can be used to understand existing power systems and experiment with alternative designs.