Operational risks, bidding strategies and information policies in restructured power markets

Advanced analytical tools are enabling the estimation of new measures of op erational reliability in power systems. In bid-based and bilateral contract markets, these estimates provide valuable information to market participan ts. Such information improves market efficiency through more informed decis ion-making. However, it may also result in opportunistic bidding strategies that adversely affects economic efficiency. The relationship between risk and bidding strategies is explored in the paper. The importance of the avai lability of a good information set on reliability is demonstrated analytica lly. Examples of information availability in restructured markets is given and questions about the dimensions of market information policies are discu ssed. An illustrative example shows how private gains from withholding info rmation can be obtained. (C) 1999 Elsevier Science B.V. All rights reserved .