Impact of Congestion and Demand Responsiveness on Market Power in Deregulated Power System

This paper presents the theoretical analysis of impact of congestion and demand responsiveness in mitigating market power of the GENCOs in the deregulated power system. For achieving the same, a new index naming Market Revenue Share (MRS) has been devised. Using this index, it has been analyzed that ability of generators to exercise market power will be reduced with the impact of demand responsiveness in imperfect electricity market. MRS index has been calculated as a percentage revenue share of the individual generator based on total market revenue earned by all the generators during any specific time span. The effectiveness of a proposed index has been demonstrated on IEEE-30 bus test system. Values of the market power and MRS Index are compared in both congested and uncongested transmission network. Results of this study, reflect that due to congestion, market power increases whereas it declines due to demand responsiveness. In other words, due to demand responsiveness, decrease in the value of MRS index of producers (having the ability to exercise market power) triggers reduction in market power of the particular generator in the deregulated electricity industry.