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An Institutional Design for an Electricity Contract Market with Central Dispatch

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  • Hung-po Chao
  • Stephen Peck
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    Abstract

    In Chao and Peck (1996), we introduced a new approach to the design of an efficient electricity market that incorporates externalities due to loop flows. This approach enables an innovative flow-based bidding scheme for pricing transmission services. In the short term, due to some technological constraints, a hybrid institutional structure that encompasses a decentralized contract market (via the system operator) is necessary for implementation. In this paper, we present an incentive scheme that fosters efficiency and reliability within such art institutional structure. An essential ingredient is that the system operator provides all electricity traders choices of priority insurance against interruptions. We show how this scheme will ensure the integrity of the electrical contract market and provide the system operator incentives to maintain system reliability in all efficient manner in real-time dispatch.

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    Bibliographic Info

    Article provided by International Association for Energy Economics in its journal The Energy Journal.

    Volume (Year): Volume18 (1997)
    Issue (Month): Number 1 ()
    Pages: 85-110

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    Handle: RePEc:aen:journl:1997v18-01-a04

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    Cited by:
    1. Claudia Mejía Pérez, 1999. "La pobreza en Colombia 1978 y 1995 : indicadores," Lecturas de Economía, Universidad de Antioquia, Departamento de Economía, issue 51, pages 195-222, Julio Dic.
    2. Anderson, Edward J. & Hu, Xinmin, 2008. "Forward contracts and market power in an electricity market," International Journal of Industrial Organization, Elsevier, vol. 26(3), pages 679-694, May.
    3. Giovanni Goldoni, 2007. "Un bilancio delle liberalizzazioni dei settori dell’energia elettrica e del gas naturale in Italia e in Europa," Working Papers 40, University of Verona, Department of Economics.
    4. DAXHELET, Olivier & SMEERS, Yves, 1999. "Variational inequality models of restructured electricity systems," CORE Discussion Papers 1999066, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    5. Rajnish Kamat & Shmuel Oren, 2004. "Two-settlement Systems for Electricity Markets under Network Uncertainty and Market Power," Journal of Regulatory Economics, Springer, vol. 25(1), pages 5-37, January.
    6. Kleindorfer, Paul R. & Wu, D. -J. & Fernando, Chitru S., 2001. "Strategic gaming in electric power markets," European Journal of Operational Research, Elsevier, vol. 130(1), pages 156-168, April.
    7. BOUCHER, Jacqueline & SMEERS, Yves, 1999. "Alternative models of restructured electricity systems. Part 1: no market power," CORE Discussion Papers 1999050, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    8. Rómulo Chumacero & Ricardo Paredes & José Miguel Sánchez, 2000. "Regulación para Crisis de Abastecimiento: Lecciones del Racionamiento Eléctrico en Chile," Latin American Journal of Economics-formerly Cuadernos de Economía, Instituto de Economía. Pontificia Universidad Católica de Chile., vol. 37(111), pages 323-338.
    9. Deng, Shi-Jie & Oren, Shmuel & Meliopoulos, A.P., 2010. "The inherent inefficiency of simultaneously feasible financial transmission rights auctions," Energy Economics, Elsevier, vol. 32(4), pages 779-785, July.
    10. Hu, X. & Ralph, R., 2006. "Using EPECs to model bilevel games in restructured electricity markets with locational prices," Cambridge Working Papers in Economics 0619, Faculty of Economics, University of Cambridge.

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