Ubicación Características y Función de las Andenerías

The Cournot competition model has been proposed by Augustin Cournot in 1838 [42]. This is an oligopolistic, non-collusive economic model, which assumes that all the firms that participate in the market act strategically and choose the quantities that they are willing to produce simultaneously, which they will then sell at the market clearing price. In Cournot’s original model the price mechanism was not specified, but the market clearing price can be thought as being determined by an auctioneer that equates the total supply and demand. Suppliers maximise profits under the assumption that all the other players will keep their output fixed and all the market participants are assumed to have the same information for their rivals’ cost functions and the load demand. An equilibrium point for this game can be determined by the condition that all the firms will choose strategies that are best responses to the anticipated actions of their opponents. This will be a Nash equilibrium of the Cournot game and none of the firms will benefit by changing its output quantity, given the output levels of the rival firms [39].

In the early development of the electricity market equilibrium analysis, the Cournot model was considered as the most appropriate one to be applied. Such orientation resulted from the fact that it was an important step beyond monopoly models, being able to assess market power up to a point. However, experience has revealed drawbacks for this approach. The principal shortcoming of the

application of the Cournot model in the electricity markets is that a power generation market is a type of supply-curve competition and not a quantity-based one. Such applications may provide inconsistent or non-realistic estimates for the market outcome, or misinterpret the ability of a firm to exercise market power. Other shortcomings arise from the fact that demand elasticity in the electricity markets is unknown [1]. The Cournot competition model suggests that the strategic generating firms should be able to sustain prices above marginal cost levels with the difference determined by the price elasticity of demand. The Cournot results for the market outcome are very sensitive to this elasticity and the equilibrium prices calculated by Cournot models tend to be higher than the prices observed in practice because the electricity markets have very low elasticity [16]. For instance, the investigation on the England and Wales market in [35] reports that the actual market prices observed were higher than the marginal costs, but not nearly as high as the theoretically calculated prices. Nevertheless, applications of the Cournot model have contributed in the literature in many distinct ways and this method is still used for investigating numerous subject matters concerning the electricity markets. Some notable applications include the following.

The studies in [33,43] have recognised that the shortcomings of applying concentration measures techniques to assess market power abilities are exacerbated in the case of restructured electricity markets and proposed a Cournot oligopolistic model that considered transmission constraints. The model was applied on the California electricity market and the geographic extent of the restructured market was explored, as it was argued that transmission congestion could isolate competition. The analysis shows that the congestion effects depend on the levels of demand and it is also advised that policy makers should take a strong interest in improving the short-run demand price responsiveness in the electricity market in order to limit market power. A subsequent study [37] that simulated future situations in the California market by representing the hydroelectric production in the Cournot model has also shown that the hydroelectric availability affects the extent of market power.

Based on the arguments in [44], the investigations in [45,31] have applied Cournot competition in linearized DC power networks to show the interactions of geographical and electric topology of the network and identify sources of market power other than capacity withholding for raising prices. The representation of network loop flows has illustrated that firms may increase their production in order to block transmission of competitive power supply to increase their profits. The firms may foreclose competition by even producing below marginal costs [46] and this action will affect the nodal prices across the whole network.

The model proposed in [32] shows that transmission constraints affect pure Cournot equilibria, demonstrating that limited transmission capacity may give a producer incentive to restrict its output in order to congest transmission into its area. The analysis in [47] investigates the existence and uniqueness of Cournot equilibria in looped transmission constrained systems and shows that a pure strategy equilibrium may cease to exist when a transmission constraint is introduced, even if the limit is higher than the flow in the unconstrained equilibrium. In addition, the existence and uniqueness of Nash-Cournot equilibria in cooperative games are investigated in [48].

In [49,50], using a DC network Cournot model, it has been shown that generators are able to capture the congestion rents and leave the transmission rights holders uncompensated by adjusting prices accordingly even in the absence of locational market power, resulting in inefficient dispatch and misplaced investment incentives. It has been suggested that strategic consumers may contribute to this inefficiency. This analysis was contradicted in [51], where transmission congestion contracts were introduced in the Cournot model, showing that they may force the firms to sell at marginal cost. A subsequent report [52] classifies the solution of [49,50] as one for a particular type of game that deviates from the definition of non-cooperative games, but it is stated that in Cournot games firms will be able to exercise market power and capture some of the congestion rent. However, the Cournot investigation in [53] shows that an integrated market for transmission and energy, in which the ISO allocates transmission capacities based on optimal operation of a meshed network, reduces market power and

prices compared with a design for separate markets where transmission rights are allocated by auctions.

Following the models proposed in [45,49], other Cournot competition studies have also employed numerical methods to calculate equilibrium solutions for more realistic systems. The model in [54] incorporates generation and transmission constraints to calculate long-term Cournot equilibria for markets in which the generators commit their output to customers through long-term contracts. A more comprehensive numerical model was proposed in [55], where the DC power network representation is implemented. Bilateral and poolco markets are simulated and unique Cournot solutions are computed. An extension of this model that considers forward contracts and accounts for the interactions with pollution emission permits markets was provided in [56], while [57] presented a modification of the DC network Cournot model that includes nonlinear losses, phase shifters and controllable DC lines. A more advanced Cournot analysis that considers nonsmooth demand functions, price caps and joint constraints incorporated in the producers’ optimisation problem, such as bounds on the proportion of transmission capacity allocated to each producer, is provided in [58].

A two-settlement market model with DC network representation has been proposed in [59]. The market is characterised by a two-period game, for which a forward market is first operated and a spot market is settled in the second period. Firms’ strategic behaviour and social welfare maximisation are assumed for both markets and network uncertainties are modelled in the spot market. The system capacities are unknown when firms enter forward contracts and Cournot equilibrium is calculated for the spot market subject to stochastic fluctuations. The model was modified in [60] to include price caps for both the forward and spot markets, showing that this results in reduced forward contracting. A review on such models can be found in [61] and a case study on a 24-bus system was presented in [62], where it was observed that the strategic firms have incentives for forward contracting. A developed version of the two-settlement market model was proposed in [63], where alternative solution methods that aim to facilitate

Cournot simulations of realistic electricity markets with probabilistic demand and system contingencies are provided.

The report in [64] compares Cournot results for case studies carried out using oligopolistic models from three different research groups and declares that structural and behavioural assumptions affect the equilibrium results. A Cournot game of incomplete information was presented in [65] and equilibria were calculated for different estimation models of the rivals’ production costs, to show how the accuracy of such predictions affects the market outcome. Additionally, a computationally efficient algorithm for the calculation of Cournot equilibria with comparisons of test cases for different market concentration and demand elasticity is provided in [66].

The report in [67] calls to attention that reactive power and voltage related issues are commonly neglected in Cournot oligopolistic models. The authors proposed that a DC approximation does not capture properly the features of the electrical network, providing an example in which Cournot players identify the potential for market power due to voltage constraints and reactive power in the system. Then, they presented a Cournot model that employs AC network representation and considers both active and reactive power quantities as strategic variables in [68,69], showing the significant impact of reactive power on the market outcome. Comparisons of Cournot outcomes under DC and AC assumptions are presented in [70].