The analysis of the behavior of generators in the two-level market model of functioning of the EPS

Electricity market model of interaction between producers (Generation Companies — GC) and System Operator (SO) is considered. We analyze the situation when power producers try to increase their profit distorting their technical parameters. SO solves a generation scheduling problem, minimizing total costs of electricity generation and calculating the nodal prices (dual variables) on the basis of technical parameters of the power plants provided by the producers. The problem is considered in two-level statement. The upper level corresponds to GC which try to increase their profit. The lower level corresponds to SO which solves the generation scheduling problem. SO takes into account technical parameters derived from GC. We study properties of the objective function of the upper level and investigate the existence of the Nash equilibrium. Numerical example for a simple electrical power system is presented. In this example we show how the GC increase profit distorting technical parameters.