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ID: 094853

Long-term contract auctions and market power in regulated power / Arellano, M Soledad; Serra, Pablo

Arellano, M Soledad	Journal Article
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Publication

2010.

Summary/Abstract

A number of countries with oligopolistic power industries have used marginal cost pricing to set the price of energy for small customers. This course of action, however, does not necessarily ensure an efficient outcome when competition is imperfect. The purpose of this paper is to study how the auction of long-term contracts could reduce market power. We do so in a two-firm, two-technology, linear-cost, static model where demand is summarized by a price inelastic load curve. In this context we show that the larger the proportion of total demand auctioned in advance, the lower are both the contract and the average spot price of energy.

Key Words

Electricity ; Market Power ; Long - Term Auctions

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ID: 101391

Modeling generation expansion in the context of a security of s / Rodilla, P; Batlle, C; Salazar, J; Sanchez, J J

Rodilla, P	Journal Article
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Publication

2011.

Summary/Abstract

In an attempt to provide electricity generation investors with appropriate economic incentives so as to maintain quality of supply at socially optimal levels, a growing number of electricity market regulators have opted for implementing a security of supply mechanism based on long-term auctions. In this context, the ability to analyze long-term investment dynamics is a key issue not only for market agents, but also for regulators. This paper describes a model developed to serve this purpose. A general system-dynamics-inspired methodology has been designed to be able to simulate these long-term auction mechanisms in the formats presently in place. A full-scale simulation based on the Colombian system was conducted to illustrate model capabilities.

Key Words

Security of Supply ; Long - Term Auctions ; Electricity Market Modeling

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