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Competition for Flexible Distribution Resources in a ’Smart’ Electricity Distribution Network

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Abstract

In a ’smart’ electricity distribution network, flexible distribution resources (FDRs) can be coordinated to improve efficiency. But coordination enables whoever controls such resources to exercise market power. The paper establishes the following efficiency rankings of market structures: Aggregators competing for FDRs are more efficient than a distribution system operator (DSO) controlling resources, which is more efficient than no FDR market. A no- market solution is more efficient than an FDR market featuring either (i) both DSO and aggregators; or (ii) a monopoly aggregator also supplying generation to the real-time market. The paper also characterizes a regulation that implements the efficient outcome.

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  • Tangerås, Thomas, 2020. "Competition for Flexible Distribution Resources in a ’Smart’ Electricity Distribution Network," Working Paper Series 1351, Research Institute of Industrial Economics.
    • Handle: RePEc:hhs:iuiwop:1351
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    References listed on IDEAS

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    1. Frank A. Wolak, 2007. "Quantifying the supply-side benefits from forward contracting in wholesale electricity markets," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 22(7), pages 1179-1209.
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    More about this item

    Keywords

    Aggregator; Distribution system operator; Market power; Real-time market; Regulation; Smart grid;
    All these keywords.

    JEL classification:

    • H41 - Public Economics - - Publicly Provided Goods - - - Public Goods
    • L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities

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