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A Comparison of Electricity Market Designs in Networks

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  • Ehrenmann, A.
  • Neuhoff, K.

Abstract

In the real world two classes of market designs are implemented to trade electricity in transmission constrained networks. Analytical results show that in two node networks integrated market designs reduce the ability of electricity generators to exercise market power relative to separated market designs. In multi node networks countervailing effects make an analytic analysis difficult. We present a formulation of both market designs as an equilibrium problem with equilibrium constraints. We find that in a realistic network, prices are lower with the integrated market design.

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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 0341.

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Length: 29
Date of creation: Sep 2003
Date of revision:
Handle: RePEc:cam:camdae:0341

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  1. Severin Borenstein & James. Bushnell & Steven Stoft, 2000. "The Competitive Effects of Transmission Capacity in A Deregulated Electricity Industry," RAND Journal of Economics, The RAND Corporation, vol. 31(2), pages 294-325, Summer.
  2. Harker, Patrick T., 1991. "Generalized Nash games and quasi-variational inequalities," European Journal of Operational Research, Elsevier, vol. 54(1), pages 81-94, September.
  3. Chao, Hung-Po & Peck, Stephen, 1996. "A Market Mechanism for Electric Power Transmission," Journal of Regulatory Economics, Springer, vol. 10(1), pages 25-59, July.
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Cited by:
  1. Hu, X. & Ralph, D. & Ralph, E.K. & Bardsley, P. & Ferris, M.C., 2004. "Electricity Generation with Looped Transmission Networks: Bidding to an ISO," Cambridge Working Papers in Economics 0470, Faculty of Economics, University of Cambridge.
  2. Hu, X. & Ralph, R., 2006. "Using EPECs to model bilevel games in restructured electricity markets with locational prices," Cambridge Working Papers in Economics 0619, Faculty of Economics, University of Cambridge.
  3. Neuhoff, Karsten & Newbery, David, 2005. "Evolution of electricity markets: Does sequencing matter?," Utilities Policy, Elsevier, vol. 13(2), pages 163-173, June.
  4. Richard Green, 2007. "Nodal pricing of electricity: how much does it cost to get it wrong?," Journal of Regulatory Economics, Springer, vol. 31(2), pages 125-149, April.
  5. Leonardo Meeus, 2010. "Implicit Auctioning on the Kontek Cable: Third Time Lucky?," RSCAS Working Papers 2010/49, European University Institute.
  6. EHRENMANN, Andreas & SMEERS, Yves, 2004. "Inefficiencies in European congestion management proposals," CORE Discussion Papers 2004090, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  7. Neuhoff, Karsten & Barquin, Julian & Boots, Maroeska G. & Ehrenmann, Andreas & Hobbs, Benjamin F. & Rijkers, Fieke A.M. & Vazquez, Miguel, 2005. "Network-constrained Cournot models of liberalized electricity markets: the devil is in the details," Energy Economics, Elsevier, vol. 27(3), pages 495-525, May.
  8. Neuhoff, K. & Newbery, D., 2004. "Integrating Energy Markets: Does Sequencing Matter?," Cambridge Working Papers in Economics 0442, Faculty of Economics, University of Cambridge.
  9. Kristiansen, Tarjei, 2007. "An assessment of the Danish-German cross-border auctions," Energy Policy, Elsevier, vol. 35(6), pages 3369-3382, June.
  10. SMEERS, Yves, 2005. "How well can one measure market power in restructured electricity systems ?," CORE Discussion Papers 2005050, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  11. Juan Escobar & Alejandro Jofré, 2010. "Monopolistic competition in electricity networks with resistance losses," Economic Theory, Springer, vol. 44(1), pages 101-121, July.

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