Analysis of Long-Term Dynamics of a Power Market due to Bounded Rationality of Investors Decisions under Different Market Designs

In this paper, the long-term dynamics of an electricity market due to bounded rationality in investment decision is analyzed under different market designs, including energy only market (EO), market with operating reserve pricing (OR), market with fixed capacity payment (FCP) and demand curve-based capacity market (DC). System dynamics (SD) method is used to analyze the behavior. Also, the equilibrium path is determined for comparison purposes. The results indicate that the different market designs have very different dynamics and it is possible to mitigate power market dynamics by selecting proper market design.