A Unique Competitive Equilibrium on Interdependent Spot Electricity and Reserve Capacity Markets
This paper studies the interdependency of a spot electricity market and a market for incremental reserve capacity in a competitive setting, where a continuum of ﬁrms supplies both markets. It is proved that a simultaneous competitive equilibrium on both markets exists in the stylised model used. It turns out that all market equilibria are characterised essentially by a u-shaped reserve capacity market bidding function and that the set of suppliers declaring reserve capacity constitutes an interval. If the supplier’s marginal cost curve is convex, then a unique equilibrium exists.
|Date of creation:||23 Aug 2011|
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- Anna Creti & Natalia Fabra, 2003. "Capacity Markets for Electricity," Industrial Organization 0309002, EconWPA, revised 26 Nov 2003.
- Just, Sebastian & Weber, Christoph, 2008. "Pricing of reserves: Valuing system reserve capacity against spot prices in electricity markets," Energy Economics, Elsevier, vol. 30(6), pages 3198-3221, November.
- Felix Müsgens, 2006. "QUANTIFYING MARKET POWER IN THE GERMAN WHOLESALE ELECTRICITY MARKET USING A DYNAMIC MULTI-REGIONAL DISPATCH MODEL -super-* ," Journal of Industrial Economics, Wiley Blackwell, vol. 54(4), pages 471-498, December.
- Green, Richard & Newbery, David M G, 1991.
"Competition in the British Electricity Spot Market,"
CEPR Discussion Papers
557, C.E.P.R. Discussion Papers.
- Green, Richard J & Newbery, David M, 1992. "Competition in the British Electricity Spot Market," Journal of Political Economy, University of Chicago Press, vol. 100(5), pages 929-53, October.
- Ali Hortaçsu & Steven L. Puller, 2008. "Understanding strategic bidding in multi-unit auctions: a case study of the Texas electricity spot market," RAND Journal of Economics, RAND Corporation, vol. 39(1), pages 86-114.
- Chao, Hung-Po & Wilson, Robert, 2002. "Multi-dimensional Procurement Auctions for Power Reserves: Robust Incentive-Compatible Scoring and Settlement Rules," Journal of Regulatory Economics, Springer, vol. 22(2), pages 161-83, September.
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