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A static deterministic linear peak-load pricing model for the electricity industry: Application to the Peruvian case

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  • Alayo, Hans
  • García, Raúl

Abstract

This article presents a static deterministic linear peak-load pricing model which finds the optimal mix of generation technologies for a given duration curve. The main contribution of the article is the idea of discretizing the duration curve. Since any real duration curve can be approximated by a discretized one, the optimal capacity mix for real world situation can be derived using a linear programming software. Then, for the model with the discretized duration curve, we derive the centralized optimal solution. Also, we show that applying marginal cost pricing allows for the recovery of all generation costs when the mix of technologies is optimal. Finally, we present an application of the proposed model to the Peruvian case; we comment and compare the results with the real capacity mix of the system for the years 2008–2013.

Suggested Citation

  • Alayo, Hans & García, Raúl, 2015. "A static deterministic linear peak-load pricing model for the electricity industry: Application to the Peruvian case," Energy Economics, Elsevier, vol. 50(C), pages 202-206.
    • Handle: RePEc:eee:eneeco:v:50:y:2015:i:c:p:202-206
    DOI: 10.1016/j.eneco.2015.05.005
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    References listed on IDEAS

    as
    1. Arellano, M. Soledad & Serra, Pablo, 2007. "Spatial peak-load pricing," Energy Economics, Elsevier, vol. 29(2), pages 228-239, March.
    2. John T. Wenders, 1976. "Peak Load Pricing in the Electric Utility Industry," Bell Journal of Economics, The RAND Corporation, vol. 7(1), pages 232-241, Spring.
    3. José David Gallardo Ku & Raúl Lizardo García Carpio & Raúl Pérez-Reyes Espejo, 2005. "Determinantes de la Inversión en el Sector Eléctrico Peruano," Working Papers 3, Osinergmin, Gerencia de Políticas y Análisis Económico.
    4. 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.
    5. 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.
    6. Arellano, Maria-Soledad & Serra, Pablo, 2007. "A model of market power in electricity industries subject to peak load pricing," Energy Policy, Elsevier, vol. 35(10), pages 5130-5135, October.
    7. Serra, Pablo J., 1997. "Energy pricing under uncertain supply," Energy Economics, Elsevier, vol. 19(2), pages 209-223, May.
    8. Raúl Pérez-Reyes Espejo & Raúl Lizardo García Carpio & Tatiana Fiorella Nario Lazo, 2011. "Valorización de las externalidades y recomposición del parque óptimo de Generación Eléctrica," Working Papers 28, Osinergmin, Gerencia de Políticas y Análisis Económico.
    9. 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.
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    Cited by:

    1. 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.
    2. Yu, L. & Li, Y.P. & Huang, G.H., 2016. "A fuzzy-stochastic simulation-optimization model for planning electric power systems with considering peak-electricity demand: A case study of Qingdao, China," Energy, Elsevier, vol. 98(C), pages 190-203.

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    More about this item

    Keywords

    Peak-load pricing; Marginal-cost pricing; Electricity industry;
    All these keywords.

    JEL classification:

    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
    • C63 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computational Techniques
    • D41 - Microeconomics - - Market Structure, Pricing, and Design - - - Perfect Competition
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities

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