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Electricity supply security: Cost efficiency of providing security and diversified consumer level

  • Klinge Jacobsen, Henrik
  • Jensen, Stine Grenaa

Security of supply in electricity is questioned in liberalised markets as it is often characterised as a public good. We examine if this can be modified allowing for creation of security markets, which can be justified by welfare gains. From a welfare perspective it is possible that security levels are too high and obtained with too high costs. An efficiency improvement might be to adjust the effort so that marginal cost for securing supply are at similar levels in generation capacity and in network maintenance. Secondarily, a consumer defined level of security might improve welfare. Finally, different willingness to pay among customers and construction of advanced markets might increase welfare further.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 41707.

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Date of creation: Aug 2009
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Handle: RePEc:pra:mprapa:41707
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  1. Rochlin, Cliff, 2004. "Resource Adequacy Requirement, Reserve Margin, and the Public Goods Argument," The Electricity Journal, Elsevier, vol. 17(3), pages 52-59, April.
  2. Mas-Colell, Andreu & Whinston, Michael D. & Green, Jerry R., 1995. "Microeconomic Theory," OUP Catalogue, Oxford University Press, number 9780195102680.
  3. de Nooij, Michiel & Koopmans, Carl & Bijvoet, Carlijn, 2007. "The value of supply security: The costs of power interruptions: Economic input for damage reduction and investment in networks," Energy Economics, Elsevier, vol. 29(2), pages 277-295, March.
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