Cournot model for Virginia's restructured electricity market

Abstract

A model to simulate the affect of restructuring in Virginia's electricity market, if and when restructuring occurs, would be extremely beneficial. Such a model will use data of the generation (supply) and transmission infrastructure as well as the major electricity loads (demand) to predict competitive prices. We present our first steps towards the implementation of such model. The specific oligopoly model chosen is known as "Cournot" model, where players decide how much to produce and market prices are obtained via an inverse demand function. The Cournot model implemented in Matlab was applied to Virginia's power network by first identifying its four main players and maximizing each players profit in terms of their respective generation quantities. An iterative procedure that converges to Cournot equilibrium was used. At the Cournot equilibrium, no single firm can profit from unilaterally changing its production decision.