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Failing Electricity Markets: Should we Shoot the Pools?

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  • Green, Richard

Abstract

This Paper discusses the electricity reforms in California and in England and Wales. In both cases, a centralized spot market played a major role, and both markets have now been abolished. This Paper argues that their disappearance is not evidence that future electricity restructuring should avoid the use of spot markets. Instead, the problems in England and Wales were largely due to market power. In California, problems arising from market power and a tightening demand-supply balance were turned into a disaster because the spot market had not been backed up by hedging contracts.

Suggested Citation

  • Green, Richard, 2001. "Failing Electricity Markets: Should we Shoot the Pools?," CEPR Discussion Papers 3010, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:3010
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    References listed on IDEAS

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    1. Joanne Evans & Richard Green, 2003. "Why did British electricity prices fall after 1998?," Working Papers EP26, Energy Policy Research Group, Cambridge Judge Business School, University of Cambridge.
    2. David M. Newbery, 1998. "Competition, Contracts, and Entry in the Electricity Spot Market," RAND Journal of Economics, The RAND Corporation, vol. 29(4), pages 726-749, Winter.
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    8. Green, Richard, 1999. "The Electricity Contract Market in England and Wales," Journal of Industrial Economics, Wiley Blackwell, vol. 47(1), pages 107-124, March.
    9. Charles Goldman & Galen Barbose & Joseph Eto, 2002. "California Customer Load Reductions during the Electricity Crisis: Did They Help to Keep the Lights On?," Journal of Industry, Competition and Trade, Springer, vol. 2(1), pages 113-142, June.
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    Cited by:

    1. Amobi, Marilyn Chikaodili, 2007. "Deregulating the electricity industry in Nigeria: Lessons from the British reform," Socio-Economic Planning Sciences, Elsevier, vol. 41(4), pages 291-304, December.
    2. Brennan, Timothy J. & Palmer, Karen L. & Martinez, Salvador A., 2001. "Implementing Electricity Restructuring: Policies, Potholes, and Prospects," Discussion Papers 10508, Resources for the Future.
    3. Gore, Olga & Viljainen, Satu & Makkonen, Mari & Kuleshov, Dmitry, 2012. "Russian electricity market reform: Deregulation or re-regulation?," Energy Policy, Elsevier, vol. 41(C), pages 676-685.
    4. Woo, C.K. & King, M. & Tishler, A. & Chow, L.C.H., 2006. "Costs of electricity deregulation," Energy, Elsevier, vol. 31(6), pages 747-768.
    5. Singh, Anoop, 2010. "Towards a competitive market for electricity and consumer choice in the Indian power sector," Energy Policy, Elsevier, vol. 38(8), pages 4196-4208, August.
    6. Thomas, Steve, 2006. "The British Model in Britain: Failing slowly," Energy Policy, Elsevier, vol. 34(5), pages 583-600, March.
    7. Timothy Brennan & Karen Palmer & Salvador Martinez, 2002. "Implementing Electricity Restructuring," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 22(1), pages 99-132, June.
    8. Jiao, Jian-Ling & Ge, Hong-Zhen & Wei, Yi-Ming, 2010. "Impact analysis of China's coal-electricity price linkage mechanism: Results from a game model," Journal of Policy Modeling, Elsevier, vol. 32(4), pages 574-588, July.
    9. Singh, Anoop & Jamasb, Tooraj & Nepal, Rabindra & Toman, Michael, 2018. "Electricity cooperation in South Asia: Barriers to cross-border trade," Energy Policy, Elsevier, vol. 120(C), pages 741-748.
    10. Aitor Ciarreta & María Espinosa, 2010. "Market power in the Spanish electricity auction," Journal of Regulatory Economics, Springer, vol. 37(1), pages 42-69, February.
    11. René Aïd, 2008. "Long-term risk management for utility companies: the next challenges," Working Papers hal-00409030, HAL.
    12. J. Robert Branston & Roger Sugden & Pedro Valdez & James Wilson, 2006. "Generating Participation and Democracy: An Illustration from Electricity Reform in Mexico," International Review of Applied Economics, Taylor & Francis Journals, vol. 20(1), pages 47-68.
    13. Dijk, Justin & Willems, Bert, 2011. "The effect of counter-trading on competition in electricity markets," Energy Policy, Elsevier, vol. 39(3), pages 1764-1773, March.
    14. Sherzod N. Tashpulatov, 2018. "The Impact of Behavioral and Structural Remedies on Electricity Prices: The Case of the England and Wales Electricity Market," Energies, MDPI, vol. 11(12), pages 1-24, December.
    15. Perez, Eloy, 2007. "A model of vertical integration and investment in generation capacity in electricity markets: The case of the bidding game," Socio-Economic Planning Sciences, Elsevier, vol. 41(4), pages 272-290, December.
    16. Ciarreta Antuñano, Aitor & Espinosa Alejos, María Paz, 2005. "A Supply Function Competition Model for the Spanish Wholesale Electricity Market," DFAEII Working Papers 1988-088X, University of the Basque Country - Department of Foundations of Economic Analysis II.
    17. Ciarreta Antuñano, Aitor & Gutiérrez Hita, Carlos, 2005. "Strategic Behavior and Collusion: An Application to the Spanish Electricity Market," DFAEII Working Papers 1988-088X, University of the Basque Country - Department of Foundations of Economic Analysis II.
    18. Ferdinand E. Banks, 2005. "An Unsympathetic Lecture on Economic Theory and the Deregulation of Natural Gas," Energy & Environment, , vol. 16(2), pages 303-319, March.

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    More about this item

    Keywords

    Electricity markets; Hedging contracts;

    JEL classification:

    • L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities

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