Physical and Financial Virtual Power Plants

12 Pages Posted: 27 Sep 2005

See all articles by Bert Willems

Bert Willems

Tilburg University - Department of Economics - CentER & TILEC; University of Toulouse 1 - Toulouse School of Economics (TSE)

Date Written: April 2005

Abstract

Regulators in Belgium and the Netherlands use different mechanisms to mitigate generation market power. In Belgium, antitrust authorities oblige the incumbent to sell financial Virtual Power Plants, while in the Netherlands regulators have been discussing the use of physical Virtual Power Plants.

This paper uses a numerical game theoretic model to stimulate the behaviour of the generation firms and to compare the effects of both systems on the market power of the generators. It shows that financial Virtual Power Plants are better for society.

Keywords: Futures Markets, Options Markets, Cournot, Market Power, Electricity, Arbitrage

JEL Classification: C72, D43, G13, L13, L94

Suggested Citation

Willems, Bert, Physical and Financial Virtual Power Plants (April 2005). Available at SSRN: https://ssrn.com/abstract=808944 or http://dx.doi.org/10.2139/ssrn.808944

Bert Willems (Contact Author)

Tilburg University - Department of Economics - CentER & TILEC ( email )

P.O. Box 90153 Room K308
Tilburg, 5000LE
Netherlands
+31134662588 (Phone)

HOME PAGE: http://www.bertwillems.com

University of Toulouse 1 - Toulouse School of Economics (TSE) ( email )

Place Anatole-France
Toulouse Cedex, F-31042
France

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