Dynamic Testing of Wholesale Power Market Designs: An Open-Source Agent-Based Framework
Authors: Junjie Sun and Leigh Tesfatsion
Economics Working Paper No. 06025, Department of Economics, Iowa State University, Revised June 2007
Abstract:
In April 2003 the U.S. Federal Energy Regulatory Commission proposed a complicated market design – the Wholesale Power Market Platform (WPMP) – for common adoption by all U.S. wholesale power markets. Versions of the WPMP have been implemented in New England, New York, the mid-Atlantic states, the Midwest, and the Southwest, and adopted for implementation in California. Strong opposition to the WPMP persists among some industry stakeholders, however, due largely to a perceived lack of adequate performance testing. This study reports on the model development and open-source implementation (in Java) of a computational wholesale power market organized in accordance with core WPMP features and operating over a realistically rendered transmission grid. The traders within this market model are strategic profit-seeking agents whose learning behaviors are based on data from human-subject experiments. Our key experimental focus is the complex interplay among structural conditions, market protocols, and learning behaviors in relation to short-term and longer-term market performance. Findings for a dynamic 5-node transmission grid test case are presented for concrete illustration.
Keywords: Wholesale power market restructuring, Empirical input validation, Market design, Behavioral economics, Learning, Market power, Agent-based modeling, AMES wholesale power market framework, Java, RepastJ.
JEL Codes: L1, D8, L9, C6