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Auctions and trading in energy markets -- an economic analysis

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  • Newbery, D.
  • Tanga McDaniel

Abstract

Auctions are playing an increasingly prominent role in the planning and operation of energy markets. Comparing the New Electricity Trading Arrangements to the former electricity Pool in England and Wales requires some analysis of the relative merits of uniform versus discriminatory pricing rules, and use of the gas network in Britain and electricity interconnectors around Europe is allocated on the basis of auction results. In this paper we discuss the changes in the trading arrangements in the electricity industry in England and Wales as well as some of the results to date. We also look at the wider issue of using auctions to replace regulation by market solutions for managing the natural monopolies in energy markets.

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Bibliographic Info

Paper provided by Faculty of Economics, University of Cambridge in its series Cambridge Working Papers in Economics with number 0233.

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Length: 24
Date of creation: Oct 2002
Date of revision:
Handle: RePEc:cam:camdae:0233

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Keywords: auctions; electricity; gas; interconnectors; networks;

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References

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  1. Rassenti, Stephen J & Smith, Vernon L & Wilson, Bart J, 2003. "Discriminatory Price Auctions in Electricity Markets: Low Volatility at the Expense of High Price Levels," Journal of Regulatory Economics, Springer, Springer, vol. 23(2), pages 109-23, March.
  2. Paul Klemperer, 1999. "Auction Theory: A Guide to the Literature," Economics Series Working Papers 1999-W12, University of Oxford, Department of Economics.
  3. Jehiel, Phillipe & Moldovanu, Benny, 1997. "Resale Markets and the Assignment of Property Rights," Sonderforschungsbereich 504 Publications, Sonderforschungsbereich 504, Universität Mannheim;Sonderforschungsbereich 504, University of Mannheim 97-05, Sonderforschungsbereich 504, Universität Mannheim;Sonderforschungsbereich 504, University of Mannheim.
  4. Newbery, D. M., 1997. "Competition, Contracts and Entry in the Electricity Spot Market," Cambridge Working Papers in Economics, Faculty of Economics, University of Cambridge 9707, Faculty of Economics, University of Cambridge.
  5. McDaniel, T., 2003. "Auctioning access to networks: evidence and expectations," Utilities Policy, Elsevier, Elsevier, vol. 11(1), pages 33-38, March.
  6. Abbink, Klaus & Brandts, Jordi & McDaniel, Tanga, 2003. "Asymmetric Demand Information in Uniform and Discriminatory Call Auctions: An Experimental Analysis Motivated by Electricity Markets," Journal of Regulatory Economics, Springer, Springer, vol. 23(2), pages 125-44, March.
  7. Tanga McDaniel & Neuhoff, K., 2002. "Auctions to gas transmission access: The British experience," Cambridge Working Papers in Economics, Faculty of Economics, University of Cambridge 0234, Faculty of Economics, University of Cambridge.
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Citations

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Cited by:
  1. Brunekreeft, G. & Newbery, D., 2005. "Should Merchant Transmission Investment be Subject to a Must-offer Provision?," Cambridge Working Papers in Economics, Faculty of Economics, University of Cambridge 0534, Faculty of Economics, University of Cambridge.
  2. Leonardo Meeus, 2010. "Implicit Auctioning on the Kontek Cable: Third Time Lucky?," RSCAS Working Papers, European University Institute 2010/49, European University Institute.
  3. Hobbs, B.F. & Rijkers, F.A.M., 2005. "The More Cooperation, the More Competition? A Cournot Analysis of the Benefits of Electric Market Coupling," Cambridge Working Papers in Economics, Faculty of Economics, University of Cambridge 0509, Faculty of Economics, University of Cambridge.
  4. Creti, Anna & Fumagalli, Eileen & Fumagalli, Elena, 2010. "Integration of electricity markets in Europe: Relevant issues for Italy," Energy Policy, Elsevier, Elsevier, vol. 38(11), pages 6966-6976, November.
  5. John J. García & Luis Camilo Fernández, 2005. "Reformas e integración vertical del sector eléctrico en Reino Unido," DOCUMENTOS DE TRABAJO CIEF, UNIVERSIDAD EAFIT 010643, UNIVERSIDAD EAFIT.
  6. Kristiansen, Tarjei, 2007. "An assessment of the Danish-German cross-border auctions," Energy Policy, Elsevier, Elsevier, vol. 35(6), pages 3369-3382, June.
  7. Vandezande, Leen & Meeus, Leonardo & Belmans, Ronnie & Saguan, Marcelo & Glachant, Jean-Michel, 2010. "Well-functioning balancing markets: A prerequisite for wind power integration," Energy Policy, Elsevier, Elsevier, vol. 38(7), pages 3146-3154, July.

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