[go: up one dir, main page]
IDEAS home Printed from https://ideas.repec.org/a/eee/enepol/v39y2011i7p3945-3953.html
   My bibliography  Save this article

Efficient pricing and investment in electricity markets with intermittent resources

Author

Listed:
  • Chao, Hung-po
Abstract
Facing growing technological and environmental challenges, the electricity industry needs effective pricing mechanism to promote efficient risk management and investment decisions. In a restructured electricity market with competitive wholesale prices and traditionally regulated retail rates, however, there are technical and institutional barriers that prevent dynamic pricing with price responsive demand. In regions with limited energy storage capacity, intermittent renewable resources present special challenges. This could adversely affect the effectiveness of public policies causing inefficient investments in energy technologies. In this paper, we present an updated economic model of pricing and investment in restructured electricity market and use the model in a simulation study for an initial assessment of renewable energy strategy and alternative pricing mechanisms. A key objective of the study is to shed light on the policy issues so that effective decisions can be made to improve efficiency.

Suggested Citation

  • Chao, Hung-po, 2011. "Efficient pricing and investment in electricity markets with intermittent resources," Energy Policy, Elsevier, vol. 39(7), pages 3945-3953, July.
    • Handle: RePEc:eee:enepol:v:39:y:2011:i:7:p:3945-3953
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0301421511000206
    Download Restriction: Full text for ScienceDirect subscribers only
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Chao, Hung-po & Wilson, Robert, 1987. "Priority Service: Pricing, Investment, and Market Organization," American Economic Review, American Economic Association, vol. 77(5), pages 899-916, December.
    2. Sherman, Roger & Visscher, Michael, 1978. "Second Best Pricing with Stochastic Demand," American Economic Review, American Economic Association, vol. 68(1), pages 41-53, March.
    3. Chao, Hung-po, 2010. "Price-Responsive Demand Management for a Smart Grid World," The Electricity Journal, Elsevier, vol. 23(1), pages 7-20, January.
    4. Hung-po Chao, 1983. "Peak Load Pricing and Capacity Planning with Demand and Supply Uncertainty," Bell Journal of Economics, The RAND Corporation, vol. 14(1), pages 179-190, Spring.
    5. Severin Borenstein & Stephen Holland, 2005. "On the Efficiency of Competitive Electricity Markets with Time-Invariant Retail Prices," RAND Journal of Economics, The RAND Corporation, vol. 36(3), pages 469-493, Autumn.
    6. Carlton, Dennis W, 1977. "Peak Load Pricing with Stochastic Demand," American Economic Review, American Economic Association, vol. 67(5), pages 1006-1010, December.
    7. Kleindorfer, Paul R & Fernando, Chitru S, 1993. "Peak-Load Pricing and Reliability under Uncertainty," Journal of Regulatory Economics, Springer, vol. 5(1), pages 5-23, March.
    8. Woo, Chi-Keung, 1990. "Efficient Electricity Pricing with Self-Rationing," Journal of Regulatory Economics, Springer, vol. 2(1), pages 69-81, March.
    9. Visscher, Michael L, 1973. "Welfare-Maximizing Price and Output with Stochastic Demand: Comment," American Economic Review, American Economic Association, vol. 63(1), pages 224-229, March.
    10. Coate, Stephen & Panzar, John C, 1989. "Public Utility Pricing and Capacity Choice under Risk: A Rational Expectations Approach," Journal of Regulatory Economics, Springer, vol. 1(4), pages 305-317, December.
    11. Bushnell, James, 2010. "Building Blocks: Investment in Renewable and Non-Renewable Technologies," Staff General Research Papers Archive 31546, Iowa State University, Department of Economics.
    12. Brown, Gardner, Jr & Johnson, M Bruce, 1969. "Public Utility Pricing and Output under Risk," American Economic Review, American Economic Association, vol. 59(1), pages 119-128, March.
    13. Crew, Michael A & Fernando, Chitru S & Kleindorfer, Paul R, 1995. "The Theory of Peak-Load Pricing: A Survey," Journal of Regulatory Economics, Springer, vol. 8(3), pages 215-248, November.
    14. Meyer, Robert A, 1975. "Monopoly Pricing and Capacity Choice under Uncertainty," American Economic Review, American Economic Association, vol. 65(3), pages 326-337, June.
    15. Tschirhart, John T, 1980. "On Public Utility Pricing under Stochastic Demand," Scottish Journal of Political Economy, Scottish Economic Society, vol. 27(3), pages 216-234, November.
    16. Panzar, John C & Sibley, David S, 1978. "Public Utility Pricing under Risk: The Case of Self-Rationing," American Economic Review, American Economic Association, vol. 68(5), pages 888-895, December.
    17. Peter O. Steiner, 1957. "Peak Loads and Efficient Pricing," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 71(4), pages 585-610.
    18. Wilson, Robert, 1989. "Ramsey Pricing of Priority Service," Journal of Regulatory Economics, Springer, vol. 1(3), pages 189-202, September.
    19. Doucet, Joseph A & Roland, Michel, 1993. "Efficient Self-Rationing of Electricity Revisited," Journal of Regulatory Economics, Springer, vol. 5(1), pages 91-100, March.
    20. Hung-po Chao, 2011. "Demand response in wholesale electricity markets: the choice of customer baseline," Journal of Regulatory Economics, Springer, vol. 39(1), pages 68-88, February.
    21. Raymond T. Bye, 1926. "The Nature and Fundamental Elements of Costs," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 41(1), pages 30-62.
    22. Chao, Hung-po & Oren, Shmuel S. & Smith, Stephen A. & Wilson, Robert B., 1986. "Multilevel demand subscription pricing for electric power," Energy Economics, Elsevier, vol. 8(4), pages 199-217, October.
    23. Wilson, Robert B, 1989. "Efficient and Competitive Rationing," Econometrica, Econometric Society, vol. 57(1), pages 1-40, January.
    24. Turvey, Ralph, 1970. "Public Utility Pricing and Output Under Risk: Comment," American Economic Review, American Economic Association, vol. 60(3), pages 485-486, June.
    25. Michael A. Crew & Paul R. Kleindorfer, 1976. "Peak Load Pricing with a Diverse Technology," Bell Journal of Economics, The RAND Corporation, vol. 7(1), pages 207-231, Spring.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Fred Schroyen & Adekola Oyenuga, 2011. "Optimal pricing and capacity choice for a public service under risk of interruption," Journal of Regulatory Economics, Springer, vol. 39(3), pages 252-272, June.
    2. Yang, Liu & Dong, Ciwei & Wan, C.L. Johnny & Ng, Chi To, 2013. "Electricity time-of-use tariff with consumer behavior consideration," International Journal of Production Economics, Elsevier, vol. 146(2), pages 402-410.
    3. Klaus Eisenack & Mathias Mier, 2019. "Peak-load pricing with different types of dispatchability," Journal of Regulatory Economics, Springer, vol. 56(2), pages 105-124, December.
    4. Mier, Mathias, 2021. "Efficient pricing of electricity revisited," Energy Economics, Elsevier, vol. 104(C).
    5. David, Laurent & Le Breton, Michel & Merillon, Olivier, 2007. "Public Utility Pricing and Capacity Choice with Stochastic Demand," IDEI Working Papers 489, Institut d'Économie Industrielle (IDEI), Toulouse.
    6. Hung-po Chao, 2011. "Demand response in wholesale electricity markets: the choice of customer baseline," Journal of Regulatory Economics, Springer, vol. 39(1), pages 68-88, February.
    7. Hung-po Chao, 2012. "Competitive electricity markets with consumer subscription service in a smart grid," Journal of Regulatory Economics, Springer, vol. 41(1), pages 155-180, February.
    8. Mathias Mier, 2018. "Policy Implications of a World with Renewables, Limited Dispatchability, and Fixed Load," Working Papers V-412-18, University of Oldenburg, Department of Economics, revised Jul 2018.
    9. Mark W. Gellerson & Shawna P. Grosskopf, 1980. "Public Utility Pricing, Investment, and Reliability under Uncertainty: A Review," Public Finance Review, , vol. 8(4), pages 477-492, October.
    10. Serra, Pablo J., 1997. "Energy pricing under uncertain supply," Energy Economics, Elsevier, vol. 19(2), pages 209-223, May.
    11. Venizelou, Venizelos & Philippou, Nikolas & Hadjipanayi, Maria & Makrides, George & Efthymiou, Venizelos & Georghiou, George E., 2018. "Development of a novel time-of-use tariff algorithm for residential prosumer price-based demand side management," Energy, Elsevier, vol. 142(C), pages 633-646.
    12. Lambin, Xavier, 2020. "Integration of Demand Response in Electricity Market Capacity Mechanisms," Utilities Policy, Elsevier, vol. 64(C).
    13. Tchai Tavor & Limor Dina Gonen & Uriel Spiegel, 2019. "Optimal Pricing and Capacity Under Well-Defined and Well-Known Deterministic Demand Fluctuations," Review of European Studies, Canadian Center of Science and Education, vol. 11(2), pages 1-15, December.
    14. Bernard, Jean-Thomas & Roland, Michel, 2000. "Load management programs, cross-subsidies and transaction costs: the case of self-rationing," Resource and Energy Economics, Elsevier, vol. 22(2), pages 161-188, May.
    15. Correia-da-Silva, João & Soares, Isabel & Fernández, Raquel, 2020. "Impact of dynamic pricing on investment in renewables," Energy, Elsevier, vol. 202(C).
    16. María Angeles García Valiñas, 2004. "Eficiencia y equidad en el diseño de precios óptimos para bienes y servicios públicos," Hacienda Pública Española / Review of Public Economics, IEF, vol. 168(1), pages 95-119, march.
    17. Adrienne Ohler & Hayley Chouinard & Jonathan Yoder, 2014. "Interest group incentives for post-lottery trade restrictions," Journal of Regulatory Economics, Springer, vol. 45(3), pages 281-304, June.
    18. Richard Arnott, 1992. "Information and Usage of Congestible Facilities Under Free Access," Discussion Papers 974, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
    19. W. Tom Whalen & Dennis W. Carlton & Ken Heyer & Oliver Richard, 2007. "Proposal For A Market-Based Solution to Airport Delays," EAG Competition Advocacy Papers 200714, Department of Justice, Antitrust Division.
    20. Qenani-Petrela, Eivis & Wandschneider, Philip R. & Mittelhammer, Ronald C. & McCluskey, Jill J., 2002. "Investing In Farm Worker Housing: A Multi-Season Peak-Load Analysis Of Washington State Data," 2002 Annual Meeting, July 28-31, 2002, Long Beach, California 36553, Western Agricultural Economics Association.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:enepol:v:39:y:2011:i:7:p:3945-3953. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/enpol .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.