The stability of power system markets

Market equilibrium conditions can be derived from more general dynamic equations describing the marketplace. Dynamic equations provide insights into the behavior and stability of markets which are not available from static models. For example, markets with a single supplier with declining linear costs (economies of scale) may or may not be stable, depending on specific cost characteristics. Markets with more than one supplier with declining linear costs are always unstable. This paper illustrates a situation where the removal of congestion makes a market unstable.