Lewis Evans () (School of Economics and Finance, P.O. Box 600, Victoria University of Wellington, Wellington, New Zealand) Graeme Guthrie () (School of Economics and Finance, P.O. Box 600, Victoria University of Wellington, Wellington, New Zealand)
Additional information is available for the following
registered author(s):
Generators supplying electricity markets are subject to volatile input and output prices and uncertain fuel availability. We show that a price-taking generator will generate only when the output price exceeds its operational marginal cost by the value of the option to delay the use of stored fuel. This option value, which is an increasing function of spot price volatility and the uncertainty about fuel availability, must be considered when evaluating whether market power is present in electricity markets. We calibrate our model to the California electricity market and show the implications of Hurricane Katrina for generators’ offers. The standard approach for simulating electricity supply curves for use in market power evaluations just uses operational marginal cost. Our work demonstrates that operational marginal cost is a lower bound for total short-run marginal cost and may considerably underestimate actual short-run marginal cost even in the complete absence of market power.
Download Info
To our knowledge, this item is not available for
download. To find whether it is available, there are three
options:
1. Check below under "Related research" whether another version of this item is available online.
2. Check on the provider's web page
whether it is in fact available.
3. Perform a search for a similarly titled item that would be
available.
Volume (Year): 75 (2009) Issue (Month): 3 (January) Pages: 681–702 Download reference. The following formats are available: HTML
(with abstract),
plain text
(with abstract),
BibTeX,
RIS (EndNote, RefMan, ProCite),
ReDIF