Short- and long-term allocation of power in liberalized electricity markets
AbstractThe experience of liberalized electricity markets’ ability to allocate scarce energy resources has been mixed. In this paper, we analyze how liberalized markets allocate power in the short and long run through the interaction between the spot and end-user markets. We show that totally inelastic demand in the spot market does not necessarily result in market failure in a shortage situation, as long as price incentives are transferred to the end-user markets. We argue that the market does not have to run optimally to handle a shortage situation, and that problems with short- or long-run allocation of power arise when price restrictions in end-user markets results in a higher demand than that which may sustain the energy situation over time.
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Bibliographic InfoPaper provided by Research Department of Statistics Norway in its series Discussion Papers with number 612.
Date of creation: Mar 2010
Date of revision:
Liberalized electricity market; allocation of power; demand response;
Find related papers by JEL classification:
- D4 - Microeconomics - - Market Structure and Pricing
- Q4 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-04-04 (All new papers)
- NEP-ENE-2010-04-04 (Energy Economics)
- NEP-MIC-2010-04-04 (Microeconomics)
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.:
- Woo, Chi-Keung & Lloyd, Debra & Tishler, Asher, 2003. "Electricity market reform failures: UK, Norway, Alberta and California," Energy Policy, Elsevier, vol. 31(11), pages 1103-1115, September.
- Faruqui, Ahmad & George, Stephen S., 2002. "The Value of Dynamic Pricing in Mass Markets," The Electricity Journal, Elsevier, vol. 15(6), pages 45-55, July.
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