Locational market power of small generators in electricity markets with LMP and system constraints

For electricity markets with nodal pricing, transmission congestions and other operating constraints, high-level competition evaluation techniques may appear to be too shallow. A more sophisticated approach is needed. Our research proposes a method focusing on the analysis of transmission congestions and submarkets that occur as a result of congestion influence. Using an optimization-based procedure, we detect generating units that may have substantial market power due to strategic positioning and can significantly affect prices by withholding small volumes of output. The approach is vibrant seeing intermittent generation penetration and increasing interaction between day-head and real-time markets. The proposed method allows an accurate conclusion on possibility of locational market power, identifies market participants exposed to market power, and system constraints that induce it.