Describing the strategic behavior of an ogliopolistic generator in hydro dominated system

This paper addresses the strategic behavior of an oligopolistic generator (hydroelectric generator) in a pool-based electricity market with predominance of hydroelectric generation, proposing a multi-stage model that considers the uncertainty about the inflow energy coming into the system. The proposed model is able to describe how the turbine outflow decision of a hydroelectric generator is influenced by hydrological conditions and expected profits over the time. This model is based on the classical theory of market equilibrium and uses an algorithm of Dynamic Stochastic Programming. The model is applied to a realistic hydrothermal system, using data from the Brazilian Electric Sector. By means of this application we identify how the oligopolistic generator exercises the power market and how regulators can mitigate this practice.