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An Institutional Design for an Electricity Contract Market with Central Dispatch

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  • Hung-po Chao
  • Stephen Peck

Abstract

In Chao and Peck (1996), we introduced a new approach to the design of an efficient electricity market that incorporates externalities due to loop flows. This approach enables an innovative flow-based bidding scheme for pricing transmission services. In the short term, due to some technological constraints, a hybrid institutional structure that encompasses a decentralized contract market (via the system operator) is necessary for implementation. In this paper, we present an incentive scheme that fosters efficiency and reliability within such art institutional structure. An essential ingredient is that the system operator provides all electricity traders choices of priority insurance against interruptions. We show how this scheme will ensure the integrity of the electrical contract market and provide the system operator incentives to maintain system reliability in all efficient manner in real-time dispatch.

Suggested Citation

  • Hung-po Chao & Stephen Peck, 1997. "An Institutional Design for an Electricity Contract Market with Central Dispatch," The Energy Journal, , vol. 18(1), pages 85-110, January.
    • Handle: RePEc:sae:enejou:v:18:y:1997:i:1:p:85-110
    DOI: 10.5547/ISSN0195-6574-EJ-Vol18-No1-4
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    References listed on IDEAS

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    1. Shmuel S. Oren, 1997. "Economic Inefficiency of Passive Transmission Rights in Congested Electricity Systems with Competitive Generation," The Energy Journal, International Association for Energy Economics, vol. 0(Number 1), pages 63-83.
    2. Harvey, Scott M. & Hogan, William W. & Pope, Susan L., 1996. "Transmission capacity reservations implemented through a spot market with transmission congestion contracts," The Electricity Journal, Elsevier, vol. 9(9), pages 42-55, November.
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