Speaker: Mel Devine
Host: David O’Sullivan
Title: Using Complementarity Problems for Game Theory Optimisation: an application for electricity market modelling.
Abstract:
Game theory optimisation involves solving the constrained optimisation problem of several competing players in equilibrium. Numerous mathematical approaches can be used to solve such problems. In this talk, the Complementarity Problem approach will be introduced and discussed. Then, an application to an electricity market model will be presented. In this model, we consider what the optimal investment mix in green technologies (wind energy, solar photovoltaic, and battery storage) will be. The players we model include generating firms, different consumer groups, and a battery storage operator. The uncertainty of wind energy and solar photovoltaic brings stochasticity into the model. We apply the model to a case study of the Irish electricity system in 2030, which is envisaged to have a significant presence of renewable sources. We consider the optimal investment mix when market power (strategic behaviour) is both present and absent from the market. Previous similar work either neglected investment decisions or market power. We observe that the presence of market power increases electricity prices which leads to increased profits for generating firms and higher consumer costs. It also leads to increased investment in green technologies but reduced carbon emissions.