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Electricity Market Design: The Good, the Bad, and the Ugly

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Abstract

This paper examines principles of market design as applied to electricity markets. I illustrate the principles with examples of both good and bad designs. I discuss one of the main design challenges—dealing with market power. I then discuss FERC’s choice of a standard market design.

Suggested Citation

  • Peter Cramton, 2003. "Electricity Market Design: The Good, the Bad, and the Ugly," Papers of Peter Cramton 02emd, University of Maryland, Department of Economics - Peter Cramton, revised 07 Dec 2002.
  • Handle: RePEc:pcc:pccumd:02emd
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    File URL: https://www.cramton.umd.edu/papers2000-2004/cramton-electricity-market-design.pdf
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    References listed on IDEAS

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    1. Lawrence M. Ausubel & Peter Cramton & Marek Pycia & Marzena Rostek & Marek Weretka, 2014. "Demand Reduction and Inefficiency in Multi-Unit Auctions," Review of Economic Studies, Oxford University Press, vol. 81(4), pages 1366-1400.
    2. Peter Cramton & Robert Wilson, 1998. "A Review of ISO New England's Proposed Market Rules," Papers of Peter Cramton 98mdi, University of Maryland, Department of Economics - Peter Cramton.
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    Cited by:

    1. Prokhorov, Oleksandr & Dreisbach, Dina, 2022. "The impact of renewables on the incidents of negative prices in the energy spot markets," Energy Policy, Elsevier, vol. 167(C).
    2. Nielsen, Kurt, 2005. "Auctioning Payment Entitlements," 2005 International Congress, August 23-27, 2005, Copenhagen, Denmark 24566, European Association of Agricultural Economists.

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    More about this item

    Keywords

    Auctions; Electricity Auctions; Market Design;
    All these keywords.

    JEL classification:

    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions

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