Impacts of transmission congestion on market power in electricity market

In power systems, transmission network provides the infrastructure to support a competitive electricity market, but congestion occurs frequently in weakly connected networks. The definitions of the market power are presented from the views of economics and regulation. Bidding strategies, such as withholding capacity and bidding at higher price, are analyzed and the impacts of transmission congestion on the locational marginal price (LMP) are illustrated in detail. Congestion will cause relative scarcity of generating capacities in the congested areas, so generation companies in these areas have locational market power. Impacts of transmission congestion on market power are evaluated by an 8-bus system. The results indicate that transmission congestion can enhance the locational market power in the congested areas and weaken the efficiency of electricity market. So this study can provide a theoretical basis for stipulating market operation rules and supervising behaviors of market participants.