Modeling Strategic Bidding in Congested Electricity Lines

In many cases, congestion is a recurrent problem that exists in electricity lines since the demand, in general, steadily increases whereas lines capacity cannot increase in small increments but only in multiple units of line capacity. Congestion in electricity lines hampers the interconnection of local markets because the interconnection line capacity is lower than the optimal. Hence it limits the European Union goal to form a unique electricity market while liberalization is spread. Moreover, congestion could jeopardize the benefits of liberalization, like it happened in California and in England, where Producers manipulated the market by bidding strategically, in other words, they withheld capacity and/or ordered higher prices than marginal cost. A better understanding of the new liberalized electricity market in order to support decision-makers to formulate sound policies is thus needed. Given the complexity of these markets, simulation seems to be a promising tool to provide an understanding thereofEngineering and Policy AnalysisEnergy and IndustryTechnology, Policy and Managemen