Get More Info!

The architecture of power market

Student name: Mr Puru Gupta
Guide: Mr Soumendu Sarkar
Year of completion: 2014
Host Organisation: TERI University

Abstract: The efficient functioning of a power market depends on its underlying architecture. A notable aspect of power market design which forms the basis for differentiation among various designs is the extent of reliance on markets. In the absence of a standard design and in view of differing social, political, economic and technological conditions several alternatives are possible which range between the two extremes. One of them is termed the integrated approach with greater authority resting with the State, the other being the unbundled approach which seeks to maximise the role of private markets with the role of the State reduced to managing transmission and facilitating private markets. We study the efficiency properties of these two different approaches. We show that the integrated approach is likely to result in an inefficient allocation even with complete information. These inefficiencies vary proportionally to the size of the market. We also show that the unbundled approach results in inefficient equilibrium outcomes on account of strategic behaviour by market participants under incomplete information, but these inefficiencies vary inversely with the size of the market.

Keywords: Power Market, Multi unit Auction, Computational Complexity.