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Market Price Calculations in Restructured Electricity Markets

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  • Gerard Doorman
  • Bjørn Nygreen

Abstract

In the traditional organisation of the power market, the generation Unit Commitment and Dispatch problem was solved as a cost minimisation problem. After deregulation of the electricity sector, the problem must be solved as a profit maximising problem. It is necessary to find feasible market prices. This is difficult, because simple marginal cost based prices not always cover startup and operation-independent costs, with the result that the generator would choose not to run with such prices. In this paper a market structure is proposed with a central market operator computing the market equilibrium for both energy and reserves, based on generator offers and consumer bids. It is shown that it is possible to find feasible market prices. Using a simple test system, it is shown that demand elasticity can have a profound impact on prices and generator revenues and profits during peaking hours. Copyright Kluwer Academic Publishers 2003

Suggested Citation

  • Gerard Doorman & Bjørn Nygreen, 2003. "Market Price Calculations in Restructured Electricity Markets," Annals of Operations Research, Springer, vol. 124(1), pages 49-67, November.
    • Handle: RePEc:spr:annopr:v:124:y:2003:i:1:p:49-67:10.1023/b:anor.0000004762.31449.33
    DOI: 10.1023/B:ANOR.0000004762.31449.33
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    Citations

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    Cited by:

    1. Abrell, Jan & Kunz, Friedrich & Weigt, Hannes, 2008. "Start Me Up: Modeling of Power Plant Start-Up Conditions and their Impact on Prices," MPRA Paper 65661, University Library of Munich, Germany.
    2. Jeanne Aslak Petersen & Ditte Heide-Jørgensen & Nina Detlefsen & Trine Boomsma, 2016. "Short-term balancing of supply and demand in an electricity system: forecasting and scheduling," Annals of Operations Research, Springer, vol. 238(1), pages 449-473, March.
    3. Jeanne Aslak Petersen & Ditte Mølgård Heide-Jørgensen & Nina Kildegaard Detlefsen & Trine Krogh Boomsma, 2016. "Short-term balancing of supply and demand in an electricity system: forecasting and scheduling," Annals of Operations Research, Springer, vol. 238(1), pages 449-473, March.
    4. Al-Muhawesh, Tareq A. & Qamber, Isa S., 2008. "The prerequisite for competition in the restructured wholesale Saudi electricity market," Energy Policy, Elsevier, vol. 36(1), pages 477-484, January.
    5. Kung-Jeng Wang & Yu-Siang Lin, 2012. "Optimal inventory replenishment strategy for deteriorating items in a demand-declining market with the retailer’s price manipulation," Annals of Operations Research, Springer, vol. 201(1), pages 475-494, December.
    6. Toczylowski, Eugeniusz & Zoltowska, Izabela, 2009. "A new pricing scheme for a multi-period pool-based electricity auction," European Journal of Operational Research, Elsevier, vol. 197(3), pages 1051-1062, September.

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