Synthesizing the market clearing mechanism based on the national power grid using hybrid of deep learning and econometric models: Evidence from the Japan Electric Power Exchange (JEPX) market

In liberalized electricity markets, formulating the techno-economic functions of each market's participant restricts the resulting market clearing mechanism (MCM) into the market equilibrium. This study aims to synthesize the MCM based on a new perspective that correlates the nationwide energy supply and demand equilibrium with the wholesale market's prices. The nationwide energy capacities are collected from all the Japanese transmission and distribution utilities from 2016 to 2022. The demand curve is structured based on estimating the price elasticity of demand (PED) considering regional and hourly cross-sections using two-stage econometrics. The supply curve is structured based on the merit order effect of all existing energy production technologies. A long short-term-memory forecasting model is employed to capture the non-stationarity and -linearity of the prices. The estimated PED varies spatiotemporally from −0.017 to −0.25. From the synthesized MCMs, Kyushu region's price drop to nearly zero is justified by the 93.5% clean supply and the use of regional interconnections. Nationally, nuclear, hydroelectric, and hydro-storage contributions to the supply mix and the balancing market launching have mitigated the price spike of 2022. In addition, the planned share increase of baseload resources in 2030 drives the prices lower with higher stability versus the current electricity mix.