Over almost a century, electrical energy was traded between vertically integrated utilities and the electricity consumers. Even until today, this kind of trading is still being implemented in some parts of the world. At one point, the economists have suggested that the prices would be lower and that the economy as a whole would benefit if the supply of electricity became the object of market discipline (Kirschen and Strbac , 2004).
Since then, some countries especially western countries have designed several market structures that can be adopted for liberalization of electricity market. In Great Britain, the wholesale electricity market was started off with the centralized Pool system which was implemented in England and Wales. However, the Pool system was not very successful in bringing down the electricity market due to market power exercise by significant number of players. After about a decade, it was completely replaced with New Electricity Trading Arrangement (NETA) in year 2001 before the market was once again upgraded to British Electricity Trading and Transmission Arrangement (BETTA) that covers Great Britain wide inclusive of Scotland in year 2005.
In these two trading arrangements (NETA and BETTA), the electrical energy is traded in the form of bilateral trading which is supported by balancing mechanism that acts as another market whose function is to keep the system in balance. The generators sometimes take advantage of this balancing mechanism to increase their profit by exercising the market power. This in turn affects the overall electricity price that the consumers have to bear and thus the objective of minimizing the electricity price may not be materialized.
Hence, this study is focusing on the evaluation of market power in electricity market in the GB with the hope that this might help to further understand the behavior of the market. It is believed that with such understanding, the electricity market will be easier to predict and preventive actions can be taken to avoid any misbehavior from the players and hence the electricity price can be kept at minimum level possible.
CONTENTS
FIGURES
TABLES
ABBREVIATIONS
ABSTRACT
CHAPTER 1: INTRODUCTION
- 1.1 Overview
1.2 Specific Objectives
1.3 Project Aims
CHAPTER 2: BACKGROUND
- 2.1 Market
- 2.1.1 Buyers and Sellers
2.1.2 Market Equilibrium
2.2 Types of Market
- 2.2.1 Spot Market
2.2.2 Forward Contract and Forward Markets
2.2.3 Future Contracts and Future Markets
2.2.4 Options
2.2.5 Contracts for Difference
2.3 Market Power
2.4 Market for Electrical Energy
- 2.4.1 Electricity Pool
2.4.2 Bilateral Trading
2.4.3 Managed Spot Market
2.5 Electricity Market Scenario in the Great Britain (GB)
2.6 Market Power Exercise in the Great Britain
CHAPTER 3: MARKET POWER EVALUATION METHODOLOGY
- 3.1 Background
3.2 Step 1: Input Data Identification and Gathering
- 3.2.1 Input Data Identification
3.2.2 Input Data Gathering
3.3 Step 2: Market Power Evaluation Modelling and Simulation
3.4 Step 3: Result Analysis
- 3.4.1 Quantitative Analysis
3.4.2 Qualitative Analysis
CHAPTER 4: MARKET POWER EVALUATION MODELLING
- 4.1 Hirschmann-Herfindahl Index (HHI)
4.2 Lerner Index
4.3 Cournot Model
4.4 Bertrand Model
CHAPTER 5: CASE STUDY 1 – MARKET POWER INVESTIGATION ON PETERHEAD POWER STATION
- 5.1 Background
5.2 Qualitative Analysis
5.3 Quantitative Analysis
- 5.3.1 Herfindahl-Hirshman Index
5.3.2 Lerner Index
5.4 Case Study Conclusion
CHAPTER 6: CASE STUDY 2 – MARKET POWER INVESTIGATION ON 13 MARCH 2006 EVENT
- 6.1 Background
6.2 Qualitative Analysis
- 6.2.1 Physical Withholding
6.2.2 Financial Withholding
6.3 Quantitative Analysis
6.4 Case Study Conclusion
CHAPTER 7: CONCLUSION
- 7.1 Summary
7.2 Further Works
REFERENCES
APPENDIX A
APPENDIX B
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