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Production inefficiency of electricity markets with hydro generation

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  • Philpott, Andy
  • Guan, Ziming
  • Khazaei, Javad
  • Zakeri, Golbon

Abstract

Electricity market designs that decentralize decision making for participants can lead to inefficiencies in the presence of nonconvexity or missing markets. This has been shown in the case of unit-commitment problems that can make a decentralized market equilibrium less efficient than a centrally planned solution. Less attention has been focused on systems with large amounts of hydro-electric generation. We describe the results of an empirical study of the New Zealand wholesale electricity market that attempts to quantify production efficiency losses by comparing market outcomes with a counterfactual central plan.

Suggested Citation

  • Philpott, Andy & Guan, Ziming & Khazaei, Javad & Zakeri, Golbon, 2010. "Production inefficiency of electricity markets with hydro generation," Utilities Policy, Elsevier, vol. 18(4), pages 174-185, December.
    • Handle: RePEc:eee:juipol:v:18:y:2010:i:4:p:174-185
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    References listed on IDEAS

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    1. James Bushnell, 2003. "A Mixed Complementarity Model of Hydrothermal Electricity Competition in the Western United States," Operations Research, INFORMS, vol. 51(1), pages 80-93, February.
    2. Severin Borenstein & James B. Bushnell & Frank A. Wolak, 2002. "Measuring Market Inefficiencies in California's Restructured Wholesale Electricity Market," American Economic Review, American Economic Association, vol. 92(5), pages 1376-1405, December.
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    Cited by:

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    2. Tsybina, Eve & Moreno-Cruz, Juan & Tereshin, Alexey, 2019. "Liberalisation lowers primary energy efficiency: Evidence from twin power systems," Energy, Elsevier, vol. 173(C), pages 423-435.
    3. Jean-Michel Glachant, 2014. "Enhancing flexibility and ensuring efficiency and security: Improving the electricity market in Brazil via a virtual reservoir model," EUI-RSCAS Working Papers p0401, European University Institute (EUI), Robert Schuman Centre of Advanced Studies (RSCAS).
    4. Felipe A. Calabria & J. Tomé Saraiva & Jean-Michel Glachant, 2014. "Enhancing flexibility and ensuring efficiency and security: Improving the electricity market in Brazil via a virtual reservoir model," RSCAS Working Papers 2014/85, European University Institute.
    5. Dominic White & Niven Winchester, 2018. "Energy- and multi-sector modelling of climate change mitigation in New Zealand: current practice and future needs," Working Papers 18_15, Motu Economic and Public Policy Research.
    6. Young, David & Poletti, Stephen & Browne, Oliver, 2014. "Can agent-based models forecast spot prices in electricity markets? Evidence from the New Zealand electricity market," Energy Economics, Elsevier, vol. 45(C), pages 419-434.
    7. Browne, Oliver & Poletti, Stephen & Young, David, 2015. "How does market power affect the impact of large scale wind investment in 'energy only' wholesale electricity markets?," Energy Policy, Elsevier, vol. 87(C), pages 17-27.
    8. Sirin, Selahattin Murat & Camadan, Ercument & Erten, Ibrahim Etem & Zhang, Alex Hongliang, 2023. "Market failure or politics? Understanding the motives behind regulatory actions to address surging electricity prices," Energy Policy, Elsevier, vol. 180(C).
    9. Poletti, Stephen, 2021. "Market Power in the New Zealand electricity wholesale market 2010–2016," Energy Economics, Elsevier, vol. 94(C).
    10. Zeng, Ming & Yang, Yongqi & Fan, Qiannan & Liu, Yingxin & Zou, Zhuojun, 2015. "Coordination between clean energy generation and thermal power generation under the policy of “direct power-purchase for large users” in China," Utilities Policy, Elsevier, vol. 33(C), pages 10-22.
    11. Yang Yang & Minglei Bao & Yi Ding & Yonghua Song & Zhenzhi Lin & Changzheng Shao, 2018. "Review of Information Disclosure in Different Electricity Markets," Energies, MDPI, vol. 11(12), pages 1-20, December.

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