This file is part of IDEAS, which uses RePEc data


[ Papers | Articles | Software | Books | Chapters | Authors | Institutions | JEL Classification | NEP reports | Search | New papers by email | Author registration | Rankings | Volunteers | FAQ | Blog | Help! ]

Reliability and Competitive Electricity Markets

Author info | Abstract | Publisher info | Download info | Related research | Statistics
Author Info
Joskow, Paul L
Tirole, Jean

Additional information is available for the following registered author(s):

Abstract

This paper seeks to bridge the gap between economists focused on designing competitive market mechanisms and engineers focused on the physical attributes and engineering requirements they perceive as being needed for operating a reliable electric power system. The paper starts by deriving the (second-best) optimal prices and investment program when there are price-insensitive retail consumers, but when their load serving entities can choose any level of rationing they prefer contingent on real time prices. It then examines the assumptions required for a competitive wholesale and retail market to achieve this optimal price and investment program. The paper analyses the implications of relaxing several of these assumptions. First, it analyzes the interrelationships between regulator-imposed price caps and capacity obligations. It goes on to explore the implications of potential network collapses, the concomitant need for operating reserve requirements and whether market prices will provide incentives for investments consistent with these reserve requirements.

Download Info
To download:

If you experience problems downloading a file, check if you have the proper application to view it first. Information about this may be contained in the File-Format links below. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.cepr.org/pubs/dps/DP6121.asp
File Format: application/pdf
File Function:
Download Restriction: CEPR Discussion Papers are free to download for our researchers, subscribers and members. If you fall into one of these categories but have trouble downloading our papers, please contact us at subscribers@cepr.org

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Publisher Info
Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 6121.

Download reference. The following formats are available: HTML (with abstract), plain text (with abstract), BibTeX, RIS (EndNote, RefMan, ProCite), ReDIF
Length:
Date of creation: Feb 2007
Date of revision:
Handle: RePEc:cpr:ceprdp:6121

Contact details of provider:
Postal: Centre for Economic Policy Research, 53--56 Great Sutton Street, London EC1V 0DG
Phone: 44 - 20 - 7183 8801
Fax: 44 - 20 - 7183 8820

Order Information:
Email:

For technical questions regarding this item, or to correct its listing, contact: ().

Related research
Keywords: electricity; incentives; regulation;

Other versions of this item:

Find related papers by JEL classification:
L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
L5 - Industrial Organization - - Regulation and Industrial Policy
L9 - Industrial Organization - - Industry Studies: Transportation and Utilities

This paper has been announced in the following NEP Reports:

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Chao, Hung-po & Wilson, Robert, 1987. "Priority Service: Pricing, Investment, and Market Organization," American Economic Review, American Economic Association, vol. 77(5), pages 899-916, December. [Downloadable!] (restricted)
  2. Severin Borenstein & Stephen P. Holland, 2003. "On the Efficiency of Competitive Electricity Markets With Time-Invariant Retail Prices," NBER Working Papers 9922, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  3. Allaz Blaise & Vila Jean-Luc, 1993. "Cournot Competition, Forward Markets and Efficiency," Journal of Economic Theory, Elsevier, vol. 59(1), pages 1-16, February. [Downloadable!] (restricted)
  4. Littlechild, S.C., 2000. "Why We Need Electricity Retailers: A Reply to Joskow on Wholesale Spot Price pass-through," Cambridge Working Papers in Economics 0008, Faculty of Economics, University of Cambridge. [Downloadable!]
  5. Joskow, Paul & Tirole, Jean, 2004. "Retail Electricity Competition," IDEI Working Papers 311, Institut d'Économie Industrielle (IDEI), Toulouse. [Downloadable!]
    Other versions:
  6. Frank A. Wolak, 2000. "An Empirical Analysis Of The Impact Of Hedge Contracts On Bidding Behavior In A Competitive Electricity Market ," International Economic Journal, Korean International Economic Association, vol. 14(2), pages 1-39, June. [Downloadable!] (restricted)
  7. Green, Richard, 1999. "The Electricity Contract Market in England and Wales," Journal of Industrial Economics, Blackwell Publishing, vol. 47(1), pages 107-24, March. [Downloadable!] (restricted)
  8. David M. Newbery, 1998. "Competition, Contracts, and Entry in the Electricity Spot Market," RAND Journal of Economics, The RAND Corporation, vol. 29(4), pages 726-749, Winter. [Downloadable!] (restricted)
    Other versions:
Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Joskow, Paul & Tirole, Jean, 2004. "Retail Electricity Competition," IDEI Working Papers 311, Institut d'Économie Industrielle (IDEI), Toulouse. [Downloadable!]
    Other versions:
  2. Anette Boom & Stefan Buehler, 2007. "Restructuring Electricity Markets when Demand is Uncertain: Effects on Capacity Investments, Prices and Welfare," CIE Discussion Papers 2007-09, University of Copenhagen. Department of Economics. Centre for Industrial Economics. [Downloadable!]
  3. Brennan, Timothy J., 2008. "Is the Benefit of Reserve Requirements in the “Reserve” or the “Requirement”?," Discussion Papers dp-08-33, Resources For the Future. [Downloadable!]
  4. Walter Buhr, 2009. "Infrastructure of the Market Economy," Volkswirtschaftliche Diskussionsbeitraege 132-09, Universität Siegen, Fachbereich Wirtschaftswissenschaften, Wirtschaftsinformatik und Wirtschaftsrecht. [Downloadable!]
  5. Vajjhala, Shalini & Paul, Anthony & Sweeney, Richard & Palmer, Karen, 2008. "Green Corridors: Linking Interregional Transmission Expansion and Renewable Energy Policies," Discussion Papers dp-08-06, Resources For the Future. [Downloadable!]
  6. 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). [Downloadable!]
  7. Paul L. Joskow, 2005. "Markets For Power In The United States - An Interim Assessment," Working Papers 0512, Massachusetts Institute of Technology, Center for Energy and Environmental Policy Research. [Downloadable!]
    Other versions:
  8. Roques, F.A., 2008. "Market Design for Generation Adequacy: Healing Causes rather than Symptoms," Cambridge Working Papers in Economics 0821, Faculty of Economics, University of Cambridge. [Downloadable!]
    Other versions:
  9. Paul L. Joskow, 2006. "Competitive Electricity Markets And Investment In New Generating Capacity," Working Papers 0609, Massachusetts Institute of Technology, Center for Energy and Environmental Policy Research. [Downloadable!]
  10. Gregor Zoettl, 2008. "Investment decisions in Liberalized Electricity Markets: A framework of Peak Load Pricing with strategic firms," Working Paper Series in Economics 38, University of Cologne, Department of Economics. [Downloadable!]
  11. Roques, F. & Newbery, D.M. & Nuttall, W.J., 2004. "Generation Adequacy and Investment Incentives in Britain: from the Pool to NETA," Cambridge Working Papers in Economics 0459, Faculty of Economics, University of Cambridge. [Downloadable!]
  12. Matsukawa, Isamu, 2006. "Regulating a Monopoly Offering Priority Service," MPRA Paper 991, University Library of Munich, Germany. [Downloadable!]
  13. Glachant, J.M. & Saguan, M., 2007. "An Institutional Frame to Compare Alternative Market Designs in EU Electricity Balancing," Cambridge Working Papers in Economics 0724, Faculty of Economics, University of Cambridge. [Downloadable!]
    Other versions:
  14. Machiel Mulder & Gijsbert Zwart, 2006. "Market failures and government policies in gas markets," CPB Memoranda 143, CPB Netherlands Bureau for Economic Policy Analysis. [Downloadable!]
  15. Roques, F.A. & Savva , N.S., 2006. "Price Cap Regulation and Investment Incentives under Demand Uncertainty," Cambridge Working Papers in Economics 0636, Faculty of Economics, University of Cambridge. [Downloadable!]
  16. Brunekreeft, G. & McDaniel, T., 2005. "Policy uncertainty and supply adaquacy in electric power markets," Discussion Paper 06, Tilburg University, Tilburg Law and Economic Center. [Downloadable!]
  17. Claude Crampes & Michel Moreaux, 2009. "Pumped storage and energy saving," Working Papers 09.17.293, LERNA, University of Toulouse. [Downloadable!]
  18. Anette Boom, 2007. "Vertically Integrated Firms' Investments in Electricity Generating Capacities," CIE Discussion Papers 2007-14, University of Copenhagen. Department of Economics. Centre for Industrial Economics. [Downloadable!]
    Other versions:
Statistics
Access and download statistics

Did you know? Over 80% of the top 1000 economists are registered on RePEc.

This page was last updated on 2009-11-25.

This information is provided to you by IDEAS at the Department of Economics, College of Liberal Arts and Sciences, University of Connecticut using RePEc data on a server sponsored by the Society for Economic Dynamics.