Investment Decisions for Perfect and Imperfect Competition in Ireland's Electricity Market

TL;DR

This paper uses game theory to compare investment strategies in Ireland's electricity market under perfect and imperfect competition, considering renewable constraints and operational costs.

Contribution

It introduces a comprehensive model incorporating market competition, renewable constraints, and unit commitment, providing new insights into investment decisions in Ireland's energy sector.

Findings

Differences in investment strategies between perfect and imperfect competition.

Impact of competition type on renewable energy contribution.

Policy implications for optimal capacity planning.

Abstract

This paper employs a game-theoretic approach to analyze investment decisions in Ireland's electricity market. It compares optimal electricity investment strategies among energy generators under a perfect competition framework with an imperfect Nash-Cournot competition. The model incorporates market price based on competition among generators while accounting for the supply capacity of each firm and each technology, along with the System Non-Synchronous Penetration (SNSP) constraint to reflect operational limitations in renewable energy contribution to the power system. Both models are formulated as single-objective function optimization problems. Furthermore, unit commitment constraints are introduced to the perfect competition model, allowing the model to incorporate binary decision variables to capture energy unit scheduling decisions of online status, startup, and shutdown costs. The proposed models are evaluated under three different demand test cases, using Ireland's electricity generation projections for 2023 to 2033. The results highlight key differences in investment decisions, carbon emissions, and the contribution of renewable technologies in perfect and imperfect competition structures. The findings provide managerial insights for policymakers and stakeholders, supporting optimal investment decisions and generation capacity planning to achieve Ireland's long-term energy objectives.