Transaction analysis in deregulated power systems using game theory

The electric power industry is in transition to a deregulated marketplace for power transactions. In this environment, all power transactions are made based on price rather than cost. A regional power pool is noted as the most straightforward path to a deregulated electricity marketplace. However, many questions remain unanswered regarding the economics of power pool participation. In a deregulated energy marketplace, participants are interested in maximizing their own profits, regardless of the system-wide profits. It is perceived that competition will reduce the price of electricity for retail customers, however, the key issue for participants is related with the price definition to remain competitive. In this paper, the authors use game theory to simulate the decision making process for defining offered prices in a deregulated environment. The outcome of this study may be used by power pool coordinators to discourage unfair coalitions. A modified IEEE 30 bus power system is used as a deregulated power pool to illustrate the main features of the proposed method.