Cross-border Transfer of Electric Power Under Uncertainty: A Game of Incomplete Information

Abstract

Cross-border transfer of electric power promotes collaboration in power generation between integrated electricity markets. It resolves grid reinforcement issues in existing transmission networks. Because of that, researchers have given higher attention to this field and conducted various studies on the subject using technical simulation approaches. Yet, substantial work has to be done for quantifying the socioeconomic benefits of the mechanism. This paper intends to fill the gap by introducing a method for analyzing the mechanism by representing it as a game of incomplete information. The subject is modeled as a Bayesian game in which the type of marginal generators located within one (or more) external market area is not known. Based on that, the Bayesian equilibrium which represents the state where all marginal generators would incline to converge is found. The authors suggest that the method is robust and can be used for quantifying the performance of a market coupling mechanism because it realistically considers all marginal generation scenarios.