Modeling for competitive utility market

Infrastructures form the backbone of the economy and society, which have a significant influence on our physical environment and our way of living. Without their basic services, social and economic developments are severely hampered. This is a part of reason why infrastructure planning, construction and operation, in most countries, used to belong to the public domain. This situation, however, is rapidly changing. Utility sectors that were previously considered to be natural monopolies are, to an increasing greater extent, being exposed to competition. In most industrialized countries, public utility functions are being privatized, and utility markets liberated. As an essential issue for the development of infrastructures, the liberalized market behavior is emphasized in this paper. Starting with a simple market model, on the basis of the analysis by the control theory, this paper gives a way to understand the market players' behavior in the developing electricity spot market. The method can also be extended to other liberalizing utility sectors. Auction mechanism, which has been introduced to the liberalization of different utility sectors (gas, airplane, electricity, etc.) as a basic transaction rule is identified, and two current spot market structures based on the double auction mechanism are described in details. Agent-based computational economics was found as an easy way to understand the phenomena of decentralized economy as a complex system, and it's also efficient to observe the market behavior of different market participants during the auction process. Finally, the application of genetic algorithm makes it possible to search optimal solution in a complex system and give quantitative result.