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Programmable fairness in electricity markets: A cost-causation–consistent alternative to marginal pricing

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  • Sweeney, Shaun

Abstract

Electricity markets must simultaneously enforce physical feasibility, allocate access under scarcity, and recover non-fuel system costs. In most liberalised systems these roles are performed through locational marginal pricing (LMP), supplemented by price caps, uplift payments, and capacity mechanisms. While effective under stable, thermal-dominated conditions, this layered approach produces distributional instability and weak cost causation as systems become more flexibility-driven and contract-heterogeneous.

Suggested Citation

  • Sweeney, Shaun, 2026. "Programmable fairness in electricity markets: A cost-causation–consistent alternative to marginal pricing," Energy Economics, Elsevier, vol. 158(C).
    • Handle: RePEc:eee:eneeco:v:158:y:2026:i:c:s0140988326002240
    DOI: 10.1016/j.eneco.2026.109345
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