Energy prices in the presence of plant indivisibilities
AbstractIn several countries (Chile, Bolivia, Argentina and Peru, among others), power plants are dispatched according to merit order, i.e., based on the marginal operating costs of the plants. In this scheme, the plant with the highest marginal cost sets the spot price at which firms trade the energy requires to fulfill their contracts. The model assumes that plants can operate at any level up to capacity, whereas real power plants have minimum operating levels. This implies that a low cost plant might have to reduce its supply in order to accommodate the minimum operating level of a more expensive power plant. This paper derives the welfare maximizing price rules in this case and shows that the standard peak load pricing rules no longer apply.
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Bibliographic InfoArticle provided by Elsevier in its journal Energy Economics.
Volume (Year): 25 (2003)
Issue (Month): 4 (July)
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Web page: http://www.elsevier.com/locate/eneco
Other versions of this item:
- Ronald Fischer & Pablo Serra, 2001. "Energy prices in the presence of plant indivisibilities," Documentos de Trabajo 108, Centro de Economía Aplicada, Universidad de Chile.
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- M. Soledad Arellano & Pablo Serra, 2003. "Principios para Tarificar la Transmisión Eléctrica (Principals for the price fixing of electricity transmission)," Documentos de Trabajo 170, Centro de Economía Aplicada, Universidad de Chile.
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