A Comprehensive Market Power Analysis Method Based on Principal Component Market Power Index

With the ongoing development of electricity markets, the potential for power generators to abuse market power has become a significant concern. Traditional multi-criteria analysis methods can be cumbersome, making existing composite indicators difficult to apply. To address this challenge, Principal Component Analysis (PCA) is utilized to streamline the assessment process by creating a composite Principal Component Market Power Index (PCMPI) based on seven key market power indicators. The results show that the first two principal components explain over 91% of the total variance, effectively simplifying the evaluation. Additionally, generators with higher PCMPI values exhibited bidding behaviors that suggest potential market manipulation, including significant fluctuations in bid prices. This study highlights the effectiveness of PCA in facilitating market power analysis and enhancing the detection of potential market abuse.