The Mathematical Institute, University of Oxford, Eprints Archive

The existence and uniqueness of a power price equilibrium

Troha, M and Hauser, Raphael (2014) The existence and uniqueness of a power price equilibrium. Technical Report. Not specified. (Submitted)


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We propose a term structure power price model that, in contrast to widely accepted no-arbitrage based approaches, accounts for the non-storable nature of power. It belongs to a class of equilibrium game theoretic models with players divided into producers and consumers. The consumers' goal is to maximize a mean-variance utility function subject to satisfying an inelastic demand of their own clients (e.g. households, businesses etc.) to whom they sell the power. The producers, who own a portfolio of power plants each defined by a running fuel (e.g. gas, coal, oil...) and physical characteristics (e.g. efficiency, capacity, ramp up/down times...), similarly, seek to maximise a mean-variance utility function consisting of power, fuel, and emission prices subject to production constraints. Our goal is to determine the term structure of the power price at which production matches consumption. In this paper we show that in such a setting the equilibrium price exists and also discuss the conditions for its uniqueness.

Item Type:Technical Report (Technical Report)
Subjects:H - N > Numerical analysis
Research Groups:Numerical Analysis Group
ID Code:1863
Deposited By: Helen Taylor
Deposited On:16 Oct 2014 08:32
Last Modified:29 May 2015 19:33

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