REVISTA DYNA ENERGÍA

Key words:

electricity market design, regional electricity markets, market coupling, transmission congestion, strategic bidding, welfare maximization, power system economics, market concentration, transmission constraints, game-theoretic modeling, electricity market integration, regulatory market design ________________________________________

Article type:

ARTICULO DE INVESTIGACION / RESEARCH ARTICLE

Section:

RESEARCH ARTICLES

ABSTRACT:
In many regions of the world, such as Europe and the United States, national electricity markets coexist with regional electricity markets that coordinate cross-border exchanges to maximize overall social welfare. However, emerging regional electricity markets, such as those currently envisioned in Latin America, face additional institutional challenges regarding the role of Zonal Market Operators (OMs). The traditional market design assumes that each OM maximizes the social welfare of its zone before participating in the regional market coordinated by a Regional Operator (OR). Alternatively, OMs may operate as pass-through entities, transferring generators' and consumers' supply and demand curves directly to the OR without performing local market optimization. This paper develops a market simulator to compare both market designs, evaluating their impact on strategic behavior, social welfare, and the existence of Cournot-Nash equilibria under transmission constraints. Results obtained in a multinodal test system show that the traditional model increases bidders'profits by approximately 19% compared to those obtained with a direct transfer model, and by 229% compared to a competitive market. Furthermore, the simulator, by using iterative techniques and mixed-integer programming with a high linear component, achieves good simulation times. For the test case, a baseline simulation lasted approximately 1-2 minutes, and its sensitivity took 10 minutes, providing versatility for its use. These findings provide quantitative evidence that the institutional design of zonal market operators can significantly influence market competition and efficiency, offering practical guidance for the development of emerging regional electricity markets.
Key Words: market power, game theory, Cournot-Nash equilibria, iterative equilibrium models, free prices markets, regional electricity integration, cross-border electricity exchanges, transmission-constrained, electricity exchanges.