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Short- and long-term allocation of power in liberalized electricity markets

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  • Torgeir Ericson
  • Bente Halvorsen

    ()
    (Statistics Norway)

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    Abstract

    The 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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    File URL: http://www.ssb.no/a/publikasjoner/pdf/DP/dp612.pdf
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    Bibliographic Info

    Paper provided by Research Department of Statistics Norway in its series Discussion Papers with number 612.

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    Date of creation: Mar 2010
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    Handle: RePEc:ssb:dispap:612

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    Keywords: Liberalized electricity market; allocation of power; demand response;

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    1. 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.
    2. 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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