Multi-area electricity market equilibrium model and its application to the European case

This paper presents an efficient approach for computing medium-term market equilibrium models under non-perfect competition, with a focus on multi-area systems, with multiple market splitting options. In accordance to the new policies and regulations aimed at creation of the Internal Electricity Market (IEM), Europe is evolving towards an integration of the electricity markets under a unified framework. Integrating the electricity markets already existing in the European countries represents a great challenge, since multiple agents’ strategic behaviors may appear depending on the state of the interconnections. When modeling this effect, the aim is to characterize each strategy by means of a conjectured price response, as a function of the state of the network. The methodology introduced in this paper reduces the possible network configurations thereby making the problem computationally tractable. Finally, this methodology has been applied to a two-year planning model for a set of nine European countries.