Wind power and market power in competitive markets
AbstractAverage market prices for intermittent generation technologies are lower than for conventional generation. This has a technical reason but can be exaggerated in the presence of market power. When there is much wind smaller amounts of conventional generation technologies are required, and prices are lower, while at times of little wind prices are higher. This effect reflects the value of different generation technologies to the system. But under conditions of market power, conventional generators with market power can further depress the prices if they have to buy back energy at times of large wind output and can increase prices if they have to sell additional power at times of little wind output. This greatly exaggerates the effect. Forward contracting does not reduce the effect. An important consequence is that allowing market power profit margins as a support mechanism for generation capacity investment is not a technologically neutral policy.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Bibliographic InfoArticle provided by Elsevier in its journal Energy Policy.
Volume (Year): 38 (2010)
Issue (Month): 7 (July)
Contact details of provider:
Web page: http://www.elsevier.com/locate/enpol
Wind power Oligopoly pricing Intermittency;
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Newbery, D. M., 1997.
"Competition, Contracts and Entry in the Electricity Spot Market,"
Cambridge Working Papers in Economics
9707, Faculty of Economics, University of Cambridge.
- David M. Newbery, 1998. "Competition, Contracts, and Entry in the Electricity Spot Market," RAND Journal of Economics, The RAND Corporation, vol. 29(4), pages 726-749, Winter.
- Allaz Blaise & Vila Jean-Luc, 1993. "Cournot Competition, Forward Markets and Efficiency," Journal of Economic Theory, Elsevier, vol. 59(1), pages 1-16, February.
- Hoogwijk, Monique & de Vries, Bert & Turkenburg, Wim, 2004. "Assessment of the global and regional geographical, technical and economic potential of onshore wind energy," Energy Economics, Elsevier, vol. 26(5), pages 889-919, September.
- Green, Richard, 1999. "The Electricity Contract Market in England and Wales," Journal of Industrial Economics, Wiley Blackwell, vol. 47(1), pages 107-24, March.
- Green, Richard & Newbery, David M G, 1991.
"Competition in the British Electricity Spot Market,"
CEPR Discussion Papers
557, C.E.P.R. Discussion Papers.
- Green, Richard J & Newbery, David M, 1992. "Competition in the British Electricity Spot Market," Journal of Political Economy, University of Chicago Press, vol. 100(5), pages 929-53, October.
- Hjalmarsson, Erik, 2003. "Does the Black-Scholes formula work for electricity markets? A nonparametric approach," Working Papers in Economics 101, University of Gothenburg, Department of Economics.
- Markus Burger & Bernhard Klar & Alfred Muller & Gero Schindlmayr, 2004. "A spot market model for pricing derivatives in electricity markets," Quantitative Finance, Taylor & Francis Journals, vol. 4(1), pages 109-122.
- Jean-Luc Gaffard & Mauro Napoletano, 2012. "Agent-based models and economic policy," Sciences Po publications info:hdl:2441/53r60a8s3ku, Sciences Po.
- Lion Hirth, 2012.
"The Market Value of Variable Renewables,"
2012.15, Fondazione Eni Enrico Mattei.
- Richard Green & Nicholas Vasilakos, 2010.
"The Economics of Offshire Wind,"
10-20, Department of Economics, University of Birmingham.
- Lynch, Muireann Á. & Shortt, Aonghus & Tol, Richard S.J. & O'Malley, Mark J., 2013.
"Risk–return incentives in liberalised electricity markets,"
Elsevier, vol. 40(C), pages 598-608.
- Richard S.J. Tol & Muireann Lynch & Aonghus Shortt & Mark O’Malley, 2012. "Risk-Return Incentives in Liberalised Electricity Markets," Working Paper Series 4012, Department of Economics, University of Sussex.
- Würzburg, Klaas & Labandeira, Xavier & Linares, Pedro, 2013. "Renewable generation and electricity prices: Taking stock and new evidence for Germany and Austria," Energy Economics, Elsevier, vol. 40(S1), pages S159-S171.
- Rubin, Ofir D. & Babcock, Bruce A., 2011. "A novel approach for modeling deregulated electricity markets," Energy Policy, Elsevier, vol. 39(5), pages 2711-2721, May.
- repec:spo:wpecon:info:hdl:2441/53r60a8s3kup1vc9l564igg8g is not listed on IDEAS
- Lion Hirth, 2013. "The Market Value of Variable Renewables. The Effect of Solar and Wind Power Variability on their Relative Price," RSCAS Working Papers 2013/36, European University Institute.
- Schaber, Katrin & Steinke, Florian & Hamacher, Thomas, 2012. "Transmission grid extensions for the integration of variable renewable energies in Europe: Who benefits where?," Energy Policy, Elsevier, vol. 43(C), pages 123-135.
- Forrest, Sam & MacGill, Iain, 2013. "Assessing the impact of wind generation on wholesale prices and generator dispatch in the Australian National Electricity Market," Energy Policy, Elsevier, vol. 59(C), pages 120-132.
- Mauritzen, Johannes, 2012. "Dead Battery? Wind Power, the Spot Market, and Hydro Power Interaction in the Nordic Electricity Market," Working Paper Series 908, Research Institute of Industrial Economics.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.