A MPCC-NLP approach for an electric power market problem

Abstract

The electric power market is changing - it has passed from a regulated market, where the government of each country had the control of prices, to a deregulated market economy. Each company competes in order to get more clients and maximize its profits. This market is represented by a Stackelberg game with two firms, leader and follower, and the leader anticipates the reaction of the follower. The problem is formulated as a Mathematical Program with Complementarity Constraints (MPCC). It is shown that the constraint qualifications usually assumed to prove convergence of standard algorithms fail to hold for MPCC. To circumvent this, a reformulation for a nonlinear problem (NLP) is proposed. Numerical tests using the NEOS server platform are presented.