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Composition of Electricity Generation Portfolios, Pivotal Dynamics, and Market Prices

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Author Info

  • Albert Banal-Estañol

    ()
    (Department of Economics, City University London, Northampton Square, London EC1V 0HB, United Kingdom; and Department of Economics and Business, Universitat Pompeu Fabra and Barcelona Graduate School of Economics, 08005 Barcelona, Spain)

  • Augusto Rupérez Micola

    ()
    (Department of Economics and Business, Universitat Pompeu Fabra and Barcelona Graduate School of Economics, 08005 Barcelona, Spain)

Abstract

We use simulations to study how the diversification of electricity generation portfolios influences wholesale prices. We find that the relationship between technological diversification and market prices is mediated by the supply-to-demand ratio. In each demand case there is a threshold where pivotal dynamics change. Pivotal dynamics pre- and post-threshold are the cause of nonlinearities in the influence of diversification on market prices. The findings are robust to changes in the main market assumptions.

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File URL: http://dx.doi.org/10.1287/mnsc.1090.1067
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Bibliographic Info

Article provided by INFORMS in its journal Management Science.

Volume (Year): 55 (2009)
Issue (Month): 11 (November)
Pages: 1813-1831

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Handle: RePEc:inm:ormnsc:v:55:y:2009:i:11:p:1813-1831

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Related research

Keywords: electricity; market power; simulations; technology diversification;

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References

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  1. Crawford, Gregory S. & Crespo, Joseph & Tauchen, Helen, 2007. "Bidding asymmetries in multi-unit auctions: Implications of bid function equilibria in the British spot market for electricity," International Journal of Industrial Organization, Elsevier, vol. 25(6), pages 1233-1268, December.
  2. Augusto Rupérez Micola & Albert Banal Estañol & Derek W. Bunn, 2006. "Incentives and Coordination in Vertically Related Energy Markets," CIG Working Papers SP II 2006-02, Wissenschaftszentrum Berlin (WZB), Research Unit: Competition and Innovation (CIG).
  3. Haruvy, Ernan & Stahl, Dale O., 2004. "Deductive versus inductive equilibrium selection: experimental results," Journal of Economic Behavior & Organization, Elsevier, vol. 53(3), pages 319-331, March.
  4. Roth, Alvin E. & Erev, Ido, 1995. "Learning in extensive-form games: Experimental data and simple dynamic models in the intermediate term," Games and Economic Behavior, Elsevier, vol. 8(1), pages 164-212.
  5. J. B. Van Huyck & R. C. Battalio & R. O. Beil, 2010. "Tacit coordination games, strategic uncertainty, and coordination failure," Levine's Working Paper Archive 661465000000000393, David K. Levine.
  6. Borenstein, Severin & Bushnell, James & Kahn, Edward & Stoft, Steven, 1995. "Market power in California electricity markets," Utilities Policy, Elsevier, vol. 5(3-4), pages 219-236.
  7. James Nicolaisen & Valentin Petrov & Leigh Tesfatsion, 2000. "Market Power and Efficiency in a Computational Electricity Market with Discriminatory Double-Auction Pricing," Computational Economics 0004005, EconWPA.
  8. Von der Fehr, N.H.M. & Harbord, D., 1992. "Spot Market Competition in the UK Electricity Industry," Memorandum 09/1992, Oslo University, Department of Economics.
  9. M. Soledad Arellano & Pablo Serra, 2005. "Market Power in Price-Regulated Power Industries," Documentos de Trabajo 208, Centro de Economía Aplicada, Universidad de Chile.
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Citations

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Cited by:
  1. Banal-Estañol, Albert & Rupérez Micola, Augusto, 2011. "Behavioural simulations in spot electricity markets," European Journal of Operational Research, Elsevier, vol. 214(1), pages 147-159, October.
  2. Filomena, Tiago Pascoal & Campos-Náñez, Enrique & Duffey, Michael Robert, 2014. "Technology selection and capacity investment under uncertainty," European Journal of Operational Research, Elsevier, vol. 232(1), pages 125-136.
  3. Yang, Liu & Dong, Ciwei & Wan, C.L. Johnny & Ng, Chi To, 2013. "Electricity time-of-use tariff with consumer behavior consideration," International Journal of Production Economics, Elsevier, vol. 146(2), pages 402-410.

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