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Industrial and Manufacturing Systems Engineering

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Conference Proceeding

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2010 IEEE Power Engineering Society General Meeting

Conference Date

July 25-29, 2010


Providence, RI


IN restructured electricity markets, generating companies submit bids to supply electricity at prices based on their marginal costs, which are driven largely by fuel costs. In each regional wholesale power market, an independent system operator (ISO) manages electricity transmission and sets locational marginal prices (LMPs) to match supplies with demands at each location on the constrained grid. To understand the interaction between constraints on fuel supply and constraints on electricity transmission, we recently developed and tested a game theoretic model that combines both sets of constraints [1][2]. It includes (1) costs of extracting and transporting finite supplies of fuels across routes with limited capacity, (2) strategic decisions of generators at different locations across a congested electricity transmission network, (3) price-sensitive demands for electricity, and (4) matching of electricity supply and demand across the network to maximize total social welfare subject to physical transmission constraints. Given the fuel and electricity network topology and capacities, fuel supplies and costs, transmission line reactances, and demand functions, the model produces LMPs and quantities of electricity generated and consumed at each location on the grid. These represent a static view of, say, a particular hour in some scenario of cost, capacity and demand.


This is an accepted manuscript of a proceeding published as Ryan, S., “Demand Price Sensitivity and Market Power in a Congested Fuel and Electricity Network,” Proceedings of the IEEE Power Engineering Society General Meeting, Minneapolis, July 2010 DOI:10.1109/PES.2010.5589919. Posted with permission.


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