Game-Theoretic Insights into the Day-Ahead Iberian Electricity Market

Fernandez J.M.R.; Gonzalez J.S.; Balsa P.P.; Payan M.B.; Chevez H.F. · International Conference on the European Energy Market, EEM (2025) · DOI: 10.1109/eem64765.2025.11050339

Resumen

Electricity markets follow a marginal pricing system, where the highest-cost dispatched generator sets the clearing price for all market participants. However, instead of bidding at their marginal costs, generators strategically adjust their offers to maximize profits. This study applies game-theoretic principles to examine how hydropower owners in the Iberian electricity market strategically influence market-clearing prices through their bidding behavior. Hydropower plants, with medium marginal costs and flexible dispatch, may submit increased bids to raise the clearing price, benefiting low-cost renewable assets that remain competitive at higher prices. By analyzing historical bidding patterns and clearing price formation, this study finds that hydropower frequently acts as the marginal technology, might shape price outcomes in the market. These results highlight the limitations of the uniform-priced market, as firms with diversified portfolios can strategically optimize bids to increase revenues.

Instituciones: Universidad de Piura