Risk Analysis of Volume Cheat Strategy in a Competitive Capacity Market

Donghan Feng; Zhao Xu

doi:10.1109/PES.2009.5275804

Risk Analysis of Volume Cheat Strategy in a Competitive Capacity Market

Donghan Feng, Zhao Xu

Research output: Chapter in Book/Report/Conference proceeding › Article in proceedings › Research › peer-review

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Abstract

Capacity market provides additional revenue stream for the power suppliers. In a capacity-energy combined market environment, suppliers have incentives to deliberately over-offer their capacities in the capacity market while bid very high price in the energy and ancillary markets to avoid operation. This paper analyzes the risks and profits of this capacity-over-offer behavior, and develops a method for computing non-operable penalty level which can prevent the capacity-over-offer behavior. It is found that the effective penalty level is highly correlated with the stochastic characteristics of the supplier's profit streams and attitudes towards risk. Two types of suppliers are identified with high potential of capacity cheating behavior in the analysis. The methodology and the results are potentially useful for regulating participants' misbehaviors and enhancing the operation security in a capacity-energy market environment.

Original language	English
Title of host publication	IEEE Power & Energy Society General Meeting, 2009. PES '09.
Publisher	IEEE
Publication date	2009
Pages	1-7
ISBN (Print)	978-1-4244-4241-6
DOIs	https://doi.org/10.1109/PES.2009.5275804
Publication status	Published - 2009
Event	2009 IEEE Power and Energy Society General Meeting - Calgary, Canada Duration: 26 Jul 2009 → 30 Jul 2009 https://ieeexplore.ieee.org/xpl/conhome/5230481/proceeding http://ewh.ieee.org/cmte/PESGM09/

Conference

Conference	2009 IEEE Power and Energy Society General Meeting
Country/Territory	Canada
City	Calgary
Period	26/07/2009 → 30/07/2009
Internet address	https://ieeexplore.ieee.org/xpl/conhome/5230481/proceeding http://ewh.ieee.org/cmte/PESGM09/

Bibliographical note

Copyright: 2009 IEEE. Personal use of this material is permitted. However, permission to reprint/republish this material for advertising or promotional purposes or for creating new collective works for resale or redistribution to servers or lists, or to reuse any copyrighted component of this work in other works must be obtained from the IEEE

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title = "Risk Analysis of Volume Cheat Strategy in a Competitive Capacity Market",

abstract = "Capacity market provides additional revenue stream for the power suppliers. In a capacity-energy combined market environment, suppliers have incentives to deliberately over-offer their capacities in the capacity market while bid very high price in the energy and ancillary markets to avoid operation. This paper analyzes the risks and profits of this capacity-over-offer behavior, and develops a method for computing non-operable penalty level which can prevent the capacity-over-offer behavior. It is found that the effective penalty level is highly correlated with the stochastic characteristics of the supplier's profit streams and attitudes towards risk. Two types of suppliers are identified with high potential of capacity cheating behavior in the analysis. The methodology and the results are potentially useful for regulating participants' misbehaviors and enhancing the operation security in a capacity-energy market environment.",

author = "Donghan Feng and Zhao Xu",

note = "Copyright: 2009 IEEE. Personal use of this material is permitted. However, permission to reprint/republish this material for advertising or promotional purposes or for creating new collective works for resale or redistribution to servers or lists, or to reuse any copyrighted component of this work in other works must be obtained from the IEEE; 2009 IEEE Power and Energy Society General Meeting ; Conference date: 26-07-2009 Through 30-07-2009",

year = "2009",

doi = "10.1109/PES.2009.5275804",

language = "English",

isbn = "978-1-4244-4241-6",

pages = "1--7",

booktitle = "IEEE Power & Energy Society General Meeting, 2009. PES '09.",

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AU - Feng, Donghan

AU - Xu, Zhao

N1 - Copyright: 2009 IEEE. Personal use of this material is permitted. However, permission to reprint/republish this material for advertising or promotional purposes or for creating new collective works for resale or redistribution to servers or lists, or to reuse any copyrighted component of this work in other works must be obtained from the IEEE

PY - 2009

Y1 - 2009

N2 - Capacity market provides additional revenue stream for the power suppliers. In a capacity-energy combined market environment, suppliers have incentives to deliberately over-offer their capacities in the capacity market while bid very high price in the energy and ancillary markets to avoid operation. This paper analyzes the risks and profits of this capacity-over-offer behavior, and develops a method for computing non-operable penalty level which can prevent the capacity-over-offer behavior. It is found that the effective penalty level is highly correlated with the stochastic characteristics of the supplier's profit streams and attitudes towards risk. Two types of suppliers are identified with high potential of capacity cheating behavior in the analysis. The methodology and the results are potentially useful for regulating participants' misbehaviors and enhancing the operation security in a capacity-energy market environment.

AB - Capacity market provides additional revenue stream for the power suppliers. In a capacity-energy combined market environment, suppliers have incentives to deliberately over-offer their capacities in the capacity market while bid very high price in the energy and ancillary markets to avoid operation. This paper analyzes the risks and profits of this capacity-over-offer behavior, and develops a method for computing non-operable penalty level which can prevent the capacity-over-offer behavior. It is found that the effective penalty level is highly correlated with the stochastic characteristics of the supplier's profit streams and attitudes towards risk. Two types of suppliers are identified with high potential of capacity cheating behavior in the analysis. The methodology and the results are potentially useful for regulating participants' misbehaviors and enhancing the operation security in a capacity-energy market environment.

U2 - 10.1109/PES.2009.5275804

DO - 10.1109/PES.2009.5275804

M3 - Article in proceedings

SN - 978-1-4244-4241-6

SP - 1

EP - 7

BT - IEEE Power & Energy Society General Meeting, 2009. PES '09.

PB - IEEE

T2 - 2009 IEEE Power and Energy Society General Meeting

Y2 - 26 July 2009 through 30 July 2009

ER -

Risk Analysis of Volume Cheat Strategy in a Competitive Capacity Market

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