Decision Making Process in Energy Market with Producers of Different Profiles

Abstract

The purpose of this paper is to formulate and study a game where there is a player who is involved for a long time interval and several small players who stay in the game for short time intervals. Examples of such games abound in practice. For example a Bank is a long-term player who stays in business for a very long time whereas most of its customers are affiliated with the Bank for relatively short time periods. Another example is the Hellenic Electrical Grid. There is the Grid Administrator, which is the major long time player, and there are many minor players (power producers with different technologies, quantity and quality features). The Grid Administrator is considered to have an infinite time horizon and the minor players are considered as players who stay in the game for a fixed period of five years (indicative number). A minor producer/consumer who enters the system a certain year is considered as one player who is involved for five (specific) time levels. This player overlaps in action with the other players who entered at different time and with the Grid Administrator. The minor players (energy producers) try to improve their strategies, by changing their profile, so as to penetrate in the electrical grid and succeed to sell more energy to the Grid (improve their profits). The Grid Administrator tries to imply the best policy so as to improve his gain.

JEL Classification: C63, C78, D47

Keywords: Energy optimization cost, Decision Policy tool, Strategies, Liberalized Energy Market