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Competition policy and regulation in hydro-dominated electricity markets

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  • Rangel, Luiz Fernando

Abstract

This paper discusses the main competition issues that arise in electricity systems dominated by hydro generation, arguing that technological differences between hydro and thermal plants may allow hydropower producers to exert market power in different and subtler ways compared to thermal generators. The key for market power in hydro-based systems is the strategic allocation of a given amount of output across periods, rather than a straightforward reduction of total output. The paper examines the interaction between strategic hydro reservoir operation and transmission capacity constraints, and summarizes the implications of market power for system reliability. A review of recent relevant literature is included. Finally, possible interventions to mitigate market power are analysed.

Suggested Citation

  • Rangel, Luiz Fernando, 2008. "Competition policy and regulation in hydro-dominated electricity markets," Energy Policy, Elsevier, vol. 36(4), pages 1292-1302, April.
  • Handle: RePEc:eee:enepol:v:36:y:2008:i:4:p:1292-1302
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    8. Choudhury, Shibabrata & Parida, Adikanda & Pant, Rajive Mohan & Chatterjee, Saibal, 2019. "GIS augmented computational intelligence technique for rural cluster electrification through prioritized site selection of micro-hydro power generation system," Renewable Energy, Elsevier, vol. 142(C), pages 487-496.
    9. Andrés-Cerezo, David & Fabra, Natalia, 2020. "Storing Power: Market Structure Matters," CEPR Discussion Papers 15444, C.E.P.R. Discussion Papers.
    10. Cheng, Chuntian & Chen, Fu & Li, Gang & Ristić, Bora & Mirchi, Ali & Qiyu, Tu & Madani, Kaveh, 2018. "Reform and renewables in China: The architecture of Yunnan's hydropower dominated electricity market," Renewable and Sustainable Energy Reviews, Elsevier, vol. 94(C), pages 682-693.
    11. Wolf-Peter Schill & Claudia Kemfert, 2011. "Modeling Strategic Electricity Storage: The Case of Pumped Hydro Storage in Germany," The Energy Journal, International Association for Energy Economics, vol. 0(Number 3), pages 59-88.
    12. Etienne Billette de Villemeur and Pierre-Olivier Pineau, 2016. "Integrating Thermal and Hydro Electricity Markets: Economic and Environmental Costs of not Harmonizing Pricing Rules," The Energy Journal, International Association for Energy Economics, vol. 0(Number 1).
    13. Berrada, Asmae & Loudiyi, Khalid & Zorkani, Izeddine, 2017. "Profitability, risk, and financial modeling of energy storage in residential and large scale applications," Energy, Elsevier, vol. 119(C), pages 94-109.
    14. Houeida Hedfi & Ahlem Dakhlaoui & Abdessalem Abbassi, 2020. "Dynamic Behaviour of Hydro/Thermal Electrical Operators Under an Environmental Policy Targeting to Preserve Ecosystems Integrity and Air Quality," Working Papers halshs-02523330, HAL.
    15. Montoya Ramírez, Rubén D. & Cuervo, Felipe Isaza & Monsalve Rico, César Antonio, 2016. "Technical and financial valuation of hydrokinetic power in the discharge channels of large hydropower plants in Colombia: A case study," Renewable Energy, Elsevier, vol. 99(C), pages 136-147.
    16. John J. García & Jesús López-Rodríguez & Jhonny Moncada-Mesa, 2017. "Spatial effects in the bid price setting strategies of the wholesale electricity markets: The case of Colombia," Documentos de Trabajo CIEF 015660, Universidad EAFIT.
    17. Bin Xu & Ping-an Zhong & Yenan Wu & Fangming Fu & Yuting Chen & Yunfa Zhao, 2017. "A Multiobjective Stochastic Programming Model for Hydropower Hedging Operations under Inexact Information," Water Resources Management: An International Journal, Published for the European Water Resources Association (EWRA), Springer;European Water Resources Association (EWRA), vol. 31(14), pages 4649-4667, November.

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