The competition and equilibrium in power markets under decarbonization and decentralization

Abstract

Equilibrium analysis has been widely studied as an effective tool to model gaming interactions and predict market results. However, as competition modes are fundamentally changed by the decarbonization and decentralization of power systems, analysis techniques must evolve. This article comprehensively reviews recent developments in modelling methods, practical settings and solution techniques in equilibrium analysis. Firstly, we review equilibrium in the evolving wholesale power markets which feature new entrants, novel trading products and multi-stage clearing. Secondly, the competition modes in the emerging distribution market and distributed resource aggregation are reviewed, and we compare peer-to-peer clearing, cooperative games and Stackelberg games. Furthermore, we summarize the methods to treat various information acquisition degrees, risk preferences and rationalities of market participants. To deal with increasingly complex market settings, this review also covers refined analytical techniques and agent-based models used to compute the equilibrium. Finally, based on this review, this paper summarizes key issues in the gaming and equilibrium analysis in power markets under decarbonization and decentralization.