Vertical integration, credit ratings and retail price settings in energy-only markets: Navigating the Resource Adequacy problem
Energy-only markets are prone to the Resource Adequacy problem, i.e. the timely entry of new plant. The reason for this is that competitive energy-only markets struggle to be remunerative given reliability constraints and market price caps. Historically, Australia's 45,000Â MW National Electricity Market has managed to navigate this well understood problem, albeit with government entities directly or indirectly responsible for a surprisingly large 73% of all new plant investments to 2007. But government involvement in direct investment has now ceased. So what will enable the industry to navigate the Resource Adequacy problem into the future? Quite simply, industrial organisation, the presence of merchant utilities with investment-grade credit ratings and setting any regulated retail prices or 'price to beat' with an LRMC floor.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
References listed on IDEAS
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.:
- James B. Bushnell & Erin T. Mansur & Celeste Saravia, 2007.
"Vertical Arrangements, Market Structure, and Competition An Analysis of Restructured U.S. Electricity Markets,"
NBER Working Papers
13507, National Bureau of Economic Research, Inc.
- James B. Bushnell & Erin T. Mansur & Celeste Saravia, 2008. "Vertical Arrangements, Market Structure, and Competition: An Analysis of Restructured US Electricity Markets," American Economic Review, American Economic Association, vol. 98(1), pages 237-66, March.
- Bushnell, James & Mansur, Erin T. & Saravia, Celeste, 2008. "Vertical Arrangements, Market Structure and Competition: An Analysis of Restructured U.S. Electricity Markets," Staff General Research Papers 13130, Iowa State University, Department of Economics.
- Dominique Finon, 2008. "Investment risk allocation in decentralised electricity markets. The need of long-term contracts and vertical integration," OPEC Energy Review, Organization of the Petroleum Exporting Countries, vol. 32(2), pages 150-183, 06.
- Paul Simshauser, 2006. "The Emergence of Structural Faults on the Supply Side in Deregulated 'Energy Only' Electricity Markets," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 39(2), pages 130-146, 06.
- Bushnell, James, 2004. "California's electricity crisis: a market apart?," Energy Policy, Elsevier, vol. 32(9), pages 1045-1052, June.
- Bushnell, James, 2005. "Electricity Resource Adequacy: Matching Policies and Goals," The Electricity Journal, Elsevier, vol. 18(8), pages 11-21, October.
- Roques Fabien A. & Newbery David M. & Nuttall William J., 2005. "Investment Incentives and Electricity Market Design: the British Experience," Review of Network Economics, De Gruyter, vol. 4(2), pages 1-36, June.
- Besser, Janet Gail & Farr, John G. & Tierney, Susan F., 2002. "The Political Economy of Long-Term Generation Adequacy: Why an ICAP Mechanism is Needed as Part of Standard Market Design," The Electricity Journal, Elsevier, vol. 15(7), pages 53-62.
- Smith, Clifford Jr. & Warner, Jerold B., 1979. "On financial contracting : An analysis of bond covenants," Journal of Financial Economics, Elsevier, vol. 7(2), pages 117-161, June.
- Neuhoff, K. & de Vries, L., 2004.
"'Insufficient Incentives for Investment in Electricity Generation’,"
Cambridge Working Papers in Economics
0428, Faculty of Economics, University of Cambridge.
- Neuhoff, Karsten & De Vries, Laurens, 2004. "Insufficient incentives for investment in electricity generations," Utilities Policy, Elsevier, vol. 12(4), pages 253-267, December.
- Paul Simshauser, 2008. "The Dynamic Efficiency Gains from Introducing Capacity Payments in the National Electricity Market," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 41(4), pages 349-370, December.
- Simshauser, Paul, 2009. "On Emissions Trading, Toxic Debt and the Australian Power Market," The Electricity Journal, Elsevier, vol. 22(2), pages 9-29, March.
- de Vries, Laurens & Heijnen, Petra, 2008. "The impact of electricity market design upon investment under uncertainty: The effectiveness of capacity mechanisms," Utilities Policy, Elsevier, vol. 16(3), pages 215-227, September.
- Newbery, D., 2006. "Market design," Cambridge Working Papers in Economics 0615, Faculty of Economics, University of Cambridge.
- Paul L. Joskow, 2001.
"California's Electricity Crisis,"
NBER Working Papers
8442, National Bureau of Economic Research, Inc.
- Simshauser, Paul, 2010. "Resource Adequacy, Capital Adequacy and Investment Uncertainty in the Australian Power Market," The Electricity Journal, Elsevier, vol. 23(1), pages 67-84, January.
- Paul Simshauser & Phillip Wild, 2009.
"The Western Australian Power Dilemma ,"
Australian Economic Papers,
Wiley Blackwell, vol. 48(4), pages 342-369, December.
- Paul Edward Simshauser & Phillip Wild, 2009. "The Western Australian Power Dilemma," Energy Economics and Management Group Working Papers 2-2009, School of Economics, University of Queensland, Australia.
- L.J. de Vries & R.A. Hakvoort, 2004. "The Question of Generation Adequacy in Liberalised Electricity Markets," Working Papers 2004.120, Fondazione Eni Enrico Mattei.
- repec:eap:articl:v:35:y:2005:i:1-2:p:23-43 is not listed on IDEAS
When requesting a correction, please mention this item's handle: RePEc:eee:enepol:v:38:y:2010:i:11:p:7427-7441. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.