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Effects of Price Ceiling on Uniform Price Electricity Auction Markets

Moshrefi, Hamid Reza | 2021

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  1. Type of Document: M.Sc. Thesis
  2. Language: Farsi
  3. Document No: 54881 (44)
  4. University: Sharif University of Technology
  5. Department: Management and Economics
  6. Advisor(s): Ebrahimnejad, Ali; Mohaghegh, Mohsen
  7. Abstract:
  8. One of the most common applications of multi-unit auctions is the energy markets, including the electricity markets. In this study, using the simulation of a uniform price wholesale electricity market, the effects of the price ceiling on the behavior of power plants and market clearing prices have been investigated. The results show that the implication of price ceilings causes power plants to reduce the slope of their bidding function near the ceiling price, and as a result, the market-clearing price decreases compared to the previous state in the absence of the price ceiling. It was also observed that the higher the probability of reaching the price ceiling (higher total demand), the more severe this decreasing effect will be, and if the probability of reaching the price ceiling is low, the power plants bidding functions in the presence and absence of the price ceiling will be the same. In addition, with the implication of the price ceiling, the market share of more efficient power plants increased, the Lerner index decreased for all power plants, and the Herfindahl-Hirschman index increased. It was observed that with decreasing demand uncertainty, the total intensity of the reduction of the market-clearing price due to the price ceiling will be milder, while according to the results of our simulation and findings of Hortacsu and Puller, the market clearing price is not sensitive to demand distribution in the absence of the price ceiling. By generalizing the simulation to the pay-as-bid mechanism, the sensitivity of the market clearing price to the existence of the price ceiling was observed again, but in this case, unlike the uniform price mechanism, the market clearing price increased.
  9. Keywords:
  10. Price Ceiling ; Auction ; Numerical Simulation ; Uniform Price Auction ; Wholesale Market ; Power Market ; Wholesale Electricity Market

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