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Competitiveness assessment of Iran's restructured electricity market

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  • Nazemi, Ali
  • Mashayekhi, Mehdi

Abstract

Iran's electricity market was restructured mostly to enhance its production efficiency. Nonetheless, the experience of liberalized electricity markets indicates that market establishment would be insufficient to produce competitive results. To determine whether the restructured market is moving toward competition, this paper assesses production efficiency in Iran's electricity market during high demand periods in 2006 as the first year of the restructured market's performance, and in 2012 as the last year with available data. We compared counterfactual benchmark outcomes to the actual dispatches to determine the production efficiency. Moreover, Iran's power market is a discriminatory, day-ahead auction; therefore, we considered the market design in the competitive benchmark. We found that the production was inefficient in both 2006 and 2012. More importantly, the production in the market is becoming increasingly inefficient over time due to exercising market power and distortion of the market's production by strategic firms. Not only were strategic firms distorting the market's production, but they were also learning to exercise more non-competitive behavior because these firms distorted the production in 2012 eight times more than they did in 2006.

Suggested Citation

  • Nazemi, Ali & Mashayekhi, Mehdi, 2015. "Competitiveness assessment of Iran's restructured electricity market," Energy Economics, Elsevier, vol. 49(C), pages 308-316.
    • Handle: RePEc:eee:eneeco:v:49:y:2015:i:c:p:308-316
    DOI: 10.1016/j.eneco.2015.02.019
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    References listed on IDEAS

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    Cited by:

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    More about this item

    Keywords

    Iran's pay-as-bid electricity market; Production efficiency; Welfare loss; Production distortion;
    All these keywords.

    JEL classification:

    • D04 - Microeconomics - - General - - - Microeconomic Policy: Formulation; Implementation; Evaluation
    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • D41 - Microeconomics - - Market Structure, Pricing, and Design - - - Perfect Competition
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • D60 - Microeconomics - - Welfare Economics - - - General

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