IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this article or follow this journal

Stability of supply function equilibria implications for daily versus hourly bids in a poolco market

  • Ross Baldick

    ()

  • William Hogan
Registered author(s):

    We consider a supply function model of a poolco electricity market where demand varies significantly over a time horizon such as a day and also has a small responsiveness to price. Although there are equilibria yielding prices at peak that are close to Cournot prices, it is known that the wider the range of demand uncertainty the narrower the range of such supply function equilibria. Here we show that such equilibria are also typically unstable and consequently would be difficult to sustain in practice. This strengthens the results of Green and Newbery by ruling out many equilibria that have high prices. We demonstrate this result both theoretically under somewhat restrictive assumptions and also numerically using both a three-firm example system and a five-firm example system having generation capacity constraints. Hence, this reinforces the conclusion that the market outcome is significantly influenced by a requirement that offers into the poolco be consistent over the time horizon. This result contrasts with markets where bids can be changed on an hourly basis, where Cournot prices are possible outcomes. The stability analysis has important policy implications for the design of day-ahead electricity markets. The stability perspective also provides a narrowing of the equilibrium selection that strengthens empirical analysis. Copyright Springer Science+Business Media, LLC 2006

    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.

    File URL: http://hdl.handle.net/10.1007/s11149-006-0017-2
    Download Restriction: Access to full text is restricted to subscribers.

    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.

    Article provided by Springer in its journal Journal of Regulatory Economics.

    Volume (Year): 30 (2006)
    Issue (Month): 2 (08)
    Pages: 119-139

    as
    in new window

    Handle: RePEc:kap:regeco:v:30:y:2006:i:2:p:119-139
    Contact details of provider: Web page: http://www.springerlink.com/link.asp?id=100298

    No references listed on IDEAS
    You can help add them by filling out this form.

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    When requesting a correction, please mention this item's handle: RePEc:kap:regeco:v:30:y:2006:i:2:p:119-139. 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: (Guenther Eichhorn)

    or (Christopher F. Baum)

    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.

    This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.