Energy market design: Agent Based Modelling and Experimental Economics

  • Supervisors:  Euan Phimister, Agathe Rouaix, Joe Swierzbinski (University of Aberdeen), Rafael Macatangay (University of Dundee)
  • Sponsoring Industry: Scottish Government
  •  PhD Student: Despina Yiakoumi

 This PhD will consider in detail the impact of differing market designs in use or proposed in the energy market.  Current Electricity Market Reform in the UK means that a range of new markets need to be designed.  Empirical evidence shows that the success of these new market mechanisms will depend crucially on their design.  While the economic predictions of what should happen in simple auction markets are quite well-known in theory, when market rules become more complex and realistic theory does not provide useful predictions. This PhD will use agent based models and economic experiments (with human subjects) to explore the likely impact of design on market outcomes in the new energy markets, focussing on examples such as the Capacity Market and development of Contract for Difference Auctions (CfD).  Agent based models which assume bounded rationality of simple agents are useful in predicting market outcomes when market rules are complex, while economic experiments can be used to explore strategic interactions between real human agents that can be observed in reality.  The PhD will help industry and government in understanding how market design in such markets affects outcomes which is important in decision making.  Private industry needs to understand how such institutional changes affect their incentives to invest while government requires understanding of the ways in which market design affects the delivery of policy objectives.