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Britain's electricity capacity auctions: lessons from Colombia and New England

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  • Harbord, David
  • Pagnozzi, Marco

Abstract

The jury is still out on the need for government-organized capacity markets in order to achieve efficient long-run investments in electricity generation. When new capacity markets are introduced, however, it is important that they are well designed and take account of existing experience and previous design failures. Experience in both Colombia and New England provide a stark warning about the dangers of placing descending clock auctions at the center of electricity capacity markets. Among alternative auction design options, a sealed-bid auction is a better choice.

Suggested Citation

  • Harbord, David & Pagnozzi, Marco, 2014. "Britain's electricity capacity auctions: lessons from Colombia and New England," MPRA Paper 56224, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:56224
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    References listed on IDEAS

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    Cited by:

    1. Sebastian Schäfer & Lisa Schulten, 2015. "Efficient Promotion of Renewable Energy with Reverse Auctions," MAGKS Papers on Economics 201520, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
    2. Boyang Qu & Lisi Fu, 2024. "Research on Market Evaluation Model of Reserve Auxiliary Service Based on Two-Stage Optimization of New Power System," Energies, MDPI, vol. 17(8), pages 1-25, April.
    3. Saldarriaga-C., Carlos A. & Salazar, Harold, 2016. "Security of the Colombian energy supply: The need for liquefied natural gas regasification terminals for power and natural gas sectors," Energy, Elsevier, vol. 100(C), pages 349-362.
    4. Sebastian Schäfer & Lisa Altvater, 2021. "A Capacity Market for the Transition towards Renewable-Based Electricity Generation with Enhanced Political Feasibility," Energies, MDPI, vol. 14(18), pages 1-24, September.
    5. Pär Holmberg & Thomas Tangerås, 2021. "Strategic Reserves versus Market-wide Capacity Mechanisms," Working Papers EPRG2109, Energy Policy Research Group, Cambridge Judge Business School, University of Cambridge.
    6. Yiakoumi, Despina & Rouaix, Agathe & Phimister, Euan, 2022. "Evaluating capacity auction design for electricity: An experimental analysis," Energy Economics, Elsevier, vol. 115(C).
    7. Peter Cramton, 2017. "Electricity market design," Oxford Review of Economic Policy, Oxford University Press and Oxford Review of Economic Policy Limited, vol. 33(4), pages 589-612.
    8. Lange, Sebastian & Sokolowski, Peter & Yu, Xinghuo, 2022. "An efficient, open-bid procurement auction for small-scale electricity markets," Applied Energy, Elsevier, vol. 314(C).
    9. Liu, Shuangquan & Yang, Qiang & Cai, Huaxiang & Yan, Minghui & Zhang, Maolin & Wu, Dianning & Xie, Mengfei, 2019. "Market reform of Yunnan electricity in southwestern China: Practice, challenges and implications," Renewable and Sustainable Energy Reviews, Elsevier, vol. 113(C), pages 1-1.
    10. Sebastian Schäfer & Lisa Schulten, 2014. "A Capacity Market to Improve the Transition towards Sustainable Electricity Generation," MAGKS Papers on Economics 201439, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).

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    More about this item

    Keywords

    Capacity markets; auctions; New England; Colombia; UK;
    All these keywords.

    JEL classification:

    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • L5 - Industrial Organization - - Regulation and Industrial Policy
    • L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities

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