Two‐stage market clearing approach to mitigate generator collusion in Eastern China electricity market via system dynamics method

Abstract

With the recent China electricity market reformation, an increasing portion of electricity is traded in wholesale electricity markets. However, collusion among generation companies reduces competition and raises market clearing prices. Based on the newly released electricity policies in China, a two‐stage market clearing method is employed to mitigate collusion. In order to evaluate the effectiveness of this method, the system dynamics method is adopted. With consideration of the two aspects of collusion, i.e. capacity withholding and bidding at a high price, the causal feedback and quantitative relationship between the generator bidding process and the market clearing process are established. The sensitivities of the market parameters are analysed in a case study with real data collected from the Eastern China electricity market. The results can be used as a reference for policy makers.