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The prerequisites for effective competition in restructured wholesale electricity markets

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  • Haas, R.
  • Auer, H.

Abstract

This paper argues that effective competition in reformed wholesale electricity markets can only be achieved if the following six prerequisites are met: (1) separation of the grid from generation and supply; (2) wholesale price deregulation; (3) sufficient transmission capacity for a competitive market and non-discriminating grid access; (4) excess generation capacity developed by a large number of competing generators; (5) an equilibrium relationship between short-term spot markets and the long-term financial instruments that marketers use to manage spot-market price volatility; (6) an essentially hands-off government policy that encompasses reduced oversight and privatization. The absence of any one of the first five conditions may result in an oligopoly or monopoly market whose economic performance does not meet the efficiency standards of a competently managed regulated electrical utility.

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  • Haas, R. & Auer, H., 2006. "The prerequisites for effective competition in restructured wholesale electricity markets," Energy, Elsevier, vol. 31(6), pages 857-864.
    • Handle: RePEc:eee:energy:v:31:y:2006:i:6:p:857-864
    DOI: 10.1016/j.energy.2005.03.008
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    3. Li, Gong & Shi, Jing & Qu, Xiuli, 2011. "Modeling methods for GenCo bidding strategy optimization in the liberalized electricity spot market–A state-of-the-art review," Energy, Elsevier, vol. 36(8), pages 4686-4700.
    4. Nasrollahi Shahri, Nima, 2011. "Power market reforms and privatization of the electricity industry in the Iranian energy sector; an uphill struggle?," MPRA Paper 28047, University Library of Munich, Germany.
    5. Dias, José G. & Ramos, Sofia B., 2014. "Energy price dynamics in the U.S. market. Insights from a heterogeneous multi-regime framework," Energy, Elsevier, vol. 68(C), pages 327-336.
    6. Ye He & Siming Guo & Yu Wang & Yujia Zhao & Weidong Zhu & Fangyuan Xu & Chun Sing Lai & Ahmed F. Zobaa, 2022. "An Agent-Based Bidding Simulation Framework to Recognize Monopoly Behavior in Power Markets," Energies, MDPI, vol. 16(1), pages 1-19, December.
    7. Moreno, Blanca & López, Ana J. & García-Álvarez, María Teresa, 2012. "The electricity prices in the European Union. The role of renewable energies and regulatory electric market reforms," Energy, Elsevier, vol. 48(1), pages 307-313.
    8. Carine Staropoli & Anne Yvrande‐Billon, 2009. "La Dynamique Des Réformes D'Industries De Réseaux:Le Cas De L'Électricité Et Des Chemins De Fer En Grande‐Bretagne," Annals of Public and Cooperative Economics, Wiley Blackwell, vol. 80(1), pages 89-117, March.
    9. Makkonen, Mari & Pätäri, Satu & Jantunen, Ari & Viljainen, Satu, 2012. "Competition in the European electricity markets – outcomes of a Delphi study," Energy Policy, Elsevier, vol. 44(C), pages 431-440.
    10. John Foster & Liam Wagner, 2014. "International experience with transformations in electricity markets: A Short Literature Review," Energy Economics and Management Group Working Papers 2-2014, School of Economics, University of Queensland, Australia.
    11. Ghaninejad, Mousa, 2020. "عرضه، تقاضا، و پیشنهاد قیمت در بازار برق ایران [Supply, Demand, and Bidding in Iran’s Electricity Market]," MPRA Paper 105340, University Library of Munich, Germany.
    12. Al-Muhawesh, Tareq A. & Qamber, Isa S., 2008. "The established mega watt linear programming-based optimal power flow model applied to the real power 56-bus system in eastern province of Saudi Arabia," Energy, Elsevier, vol. 33(1), pages 12-21.
    13. Dias, José G. & Ramos, Sofia B., 2014. "Heterogeneous price dynamics in U.S. regional electricity markets," Energy Economics, Elsevier, vol. 46(C), pages 453-463.
    14. Auer, Hans & Haas, Reinhard, 2016. "On integrating large shares of variable renewables into the electricity system," Energy, Elsevier, vol. 115(P3), pages 1592-1601.
    15. Ferreira, Paula & Araujo, Madalena & O'Kelly, M.E.J., 2007. "An overview of the Portuguese electricity market," Energy Policy, Elsevier, vol. 35(3), pages 1967-1977, March.

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