Investment Decisions for Perfect and Imperfect Competition in Ireland's Electricity Market
Davoud Hosseinnezhad, Mel T. Devine, Seán McGarraghy
TL;DR
The paper addresses how market structure—perfect versus Nash-Cournot imperfect competition—shapes long-term capacity investment and generation in Ireland's electricity market under SNSP limits and unit-commitment constraints. It uses a single-level reformulation with a conjectural variation parameter $\theta$ to compare outcomes for $\theta=0$ and $\theta=1$, including scenarios with and without unit commitment. Key findings show that imperfect competition leads to higher prices and different emissions profiles, while perfect competition with unit commitment tends to drive higher renewable penetration and larger investment, illustrating important trade-offs for market design and decarbonization planning in Ireland. The work integrates Ireland-specific data into a comparative framework that informs policymakers on how competition and operational constraints interact with long-term investment and emissions objectives. All results are anchored in detailed Irish market data and scenario analysis.
Abstract
This paper employs a game-theoretic approach to analyze investment decisions in Ireland's electricity market. It compares optimal electricity investment strategies among energy generators under a perfect competition framework with an imperfect Nash-Cournot competition. The model incorporates market price based on competition among generators while accounting for the supply capacity of each firm and each technology, along with the System Non-Synchronous Penetration (SNSP) constraint to reflect operational limitations in renewable energy contribution to the power system. Both models are formulated as single-objective function optimization problems. Furthermore, unit commitment constraints are introduced to the perfect competition model, allowing the model to incorporate binary decision variables to capture energy unit scheduling decisions of online status, startup, and shutdown costs. The proposed models are evaluated under three different demand test cases, using Ireland's electricity generation projections for 2023 to 2033. The results highlight key differences in investment decisions, carbon emissions, and the contribution of renewable technologies in perfect and imperfect competition structures. The findings provide managerial insights for policymakers and stakeholders, supporting optimal investment decisions and generation capacity planning to achieve Ireland's long-term energy objectives.