Estimation of Marginal Cost Function Using Bid Price and Quantity to Electricity Market

A major challenge for designers of competitive electricity markets is to devise market rules for limiting the capability of electricity producers to exercise market power. Market power is the ability of a firm owning generation assets to raise the market price by its bidding behavior, and to profit from such increase. In addition, an important plan of market monitoring units in long term and competition policy framework is to persuade the participants to bid prices near to their marginal costs. Therefore, estimation ofmarginal cost function is important due to its usage for Regulatory to increase competition in electricity markets. Bid price of a power plant to power market contains some useful information. Such information can lead to accurate estimation of their marginal cost. In this paper, the marginal cost of a typical power plant is estimated using optimalbidding behavior model in a competitive electricity market and Iran power market data electricity supply, induce efficient, because power generator companies compete forproduct of power with high quality and prepare better and different service [1]. In Iran, from 2003 power industry restructured in order to increase the competition and to persuade private sector investors in wholesale market. At present, the major aim of competitive market designers specifically regulator body, is to devise market rules for limiting the capability of electricity producers to exercise market power. In order to measure the market power of generating units by means of Lerner Index, their marginal cost is required. In this paper the Optimal bidding behavior model is used to estimate the marginal cost function. This model and power market’s data are then usedto estimate marginal cost of both gas andsteam units of Neka Power Plant.

کلیدواژه ها:

Marginal cost function ، Model of optimal bidding behavior ، Bertrand oligopoly model