Methods for Estimation of Market Power in Electric Power Industry
The article is related to a topical issue of the newly-arisen market power phenomenon in the electric power industry. The authors point out to the importance of effective instruments and methods for credible estimation of the market power on liberalized electricity market as well as the forms and consequences of market power abuse. The fundamental principles and methods of the market power estimation are given along with the most common relevant indicators. Furthermore, in the work a proposal for determination of the relevant market place taking into account the specific features of power system and a theoretical example of estimating the residual supply index (RSI) in the electricity market are given.
The national energy and climate plans developed by the Baltic States for the period up to 2030 foresee a significant increase in the share of renewable energy in final consumption. Therefore, the development of wind, solar and distributed generation in the Baltic electricity system is expected to increase significantly in the next decade and, thus, the need for balancing capacity will increase. The planned synchronisation of the Baltic power system with the power system of Continental Europe in 2025 will also increase the need for frequency restoration and balancing reserves. At the same time, the shutdown of uncompetitive thermal power plants in the Baltics reduces centralized generation capacity. If this trend continues, the risk of electricity supply shortages will increase in the future. Therefore, it is important to identify activities that help mitigate this risk and take timely actions.