Spatial peak-load pricing
AbstractThis article extends the traditional electricity peak-load pricing model to include transmission costs. In the context of a two-node, two-technology electric power system, where suppliers face inelastic demand, we show that when the marginal plant is located at the energy-importing center, generators located away from that center should pay the marginal capacity transmission cost; otherwise, consumers should bear this cost through capacity payments. Since electric power transmission is a natural monopoly, marginal-cost pricing does not fully cover costs. We propose distributing the revenue deficit among users in proportion to the surplus they derive from the service priced at marginal cost.
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Bibliographic InfoArticle provided by Elsevier in its journal Energy Economics.
Volume (Year): 29 (2007)
Issue (Month): 2 (March)
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Web page: http://www.elsevier.com/locate/eneco
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