Dynamic games in the wholesale electricity market

We analyze infinite discrete-time games between hydraulic and thermal power operators in the wholesale electricity market. Two types of games are considered: Cournot closed-loop game and Stackelberg closed-loop game. The hydraulic operator decides the production with respect to the stochastic dynamic constraint on the water stored in the dam. In contrast, the thermal plant is operated with quadratic cost function, with respect to the capacity production constraint. This paper is devoted to the numerical computations of equilibrium strategies and value function in each kind of games. We show that under imperfect competition, the hydraulic operator has a strategic storage of water in the peak season. Under Cournot closed-loop game, we show that the traditional principle of least-cost operation is inverted at the binding capacity constraint of thermal operator. Finally, under Stackelberg closed-loop game, we show that thermal operator can restrict the hydraulic output without compensation.