Modelling price formation in electricity markets is a notoriously difficult process, due to physical constraints on electricity generation and transmission, and the potential for market power. This difficulty has inspired the recent development of bottom-up agent-based algorithmic learning...

We study two electricity markets connected by a fixed amount of cross-border capacity. The total amount of capacity is known to all electricity traders and allocated via an auction. The capacity allocated to each bidder in the auction remains private information. We assume that traders are faced...

This paper studies Bertrand price-setting behavior when firms face capacity constraints (Bertrand–Edgeworth game). This game is known to lack equilibria in pure strategies, while the mixed-strategy equilibria are hard to characterize. We explore families of heuristic rules for individual...

In the last few decades, electricity markets have undergone extensive reforms. A process of liberalizing electricity markets has been implemented by several countries, reducing the incumbents' market power. Thus, generation and retail are open to competition, while transmission and distribution...

Using recursive estimation and rolling windows over extended sample periods we examine the time-varying relationship between spot and short-term forward prices in the Pennsylvania–New Jersey–Maryland (PJM) wholesale electricity market. We examine theoretical models of forward risk premia in...

This paper uses high frequency spot price data from eight wholesale electricity markets in Australia, Canada, and the United States to estimate realized volatility and the frequency of price spikes. I find similar levels of realized volatility in Australia and North America, with estimates...

Several regulatory authorities worldwide have imposed forward contract commitments on electricity producers as a way to mitigate their market power. In this paper we analyze the impact of such commitments on equilibrium outcomes in a model that reflects important institutional and structural...

In this paper we measure the impact of regulatory measures which affected the Spanish electricity wholesale market between 2002 and 2005. Our approach is based on the fact that regulation changes incentives for firms and therefore their market behavior. In the absence of any regulation, firms...

Very tight generation capacity (‘underinvestment’) in competitive electricity markets is a major concern to policymakers. Employing a model with endogenous capacity, capacity mix, operations and with uncertain demand we show that ‘underinvestment’ is due to the rational (non-abusive)...

This Paper discusses the electricity reforms in California and in England and Wales. In both cases, a centralized spot market played a major role, and both markets have now been abolished. This Paper argues that their disappearance is not evidence that future electricity restructuring should...