Li, Hongyan; Sun, Junjie; Tesfatsion, Leigh

IEEE Proceedings, Power and Energy Society, Piscataway, NJ, (July/August 2008)

This study investigates the complicated nonlinear effects of demand-bid price sensitivity and supply-offer price caps on Locational Marginal Prices (LMPs) for bulk electric power when profit-seeking generators can learn over time how to strategize their supply offers. Systematic computational experiments are conducted using AMES, an open-source agent-based test bed developed by the authors. AMES models a restructured wholesale power market operating through time over an AC transmission grid subject to line constraints, generation capacity constraints, and strategic trader behaviors. Related work can be accessed at: http://www.econ.iastate.edu/tesfatsi/AMESMarketHome.htm

JEL Classification: C6, C7, D4, D6, L1, L2, L3, L94, Q4

Keywords: locational marginal prices, market power, Agent-based test bed, AMES, wholesale electric power, demand response, price caps