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How many markets for wholesale electricity when supply ispartially flexible?

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  • Crampes, Claude
  • Renault, Jérôme

Abstract

The development of non-dispatchable renewable sources of energy requires more flexible reliable thermal equipment to match residual demand. We analyze the advantages of delaying production decisions to benefit from more precise information on states of the world, at the expense of higher production costs in a two-period framework where two technologies with different flexibility characteristics are available. We determine first-best production levels ex ante and ex post, that is, when demand is still random and is known with certainty respectively. We then show that, under perfect competition, first best can be implemented indifferently either by means of ex post state-contingent markets or by means of a day-ahead market followed by adjustment markets. By contrast, when the industry is imperfectly competitive, the two market designs are not equivalent.

Suggested Citation

  • Crampes, Claude & Renault, Jérôme, 2019. "How many markets for wholesale electricity when supply ispartially flexible?," Energy Economics, Elsevier, vol. 81(C), pages 465-478.
    • Handle: RePEc:eee:eneeco:v:81:y:2019:i:c:p:465-478
    DOI: 10.1016/j.eneco.2019.04.019
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    References listed on IDEAS

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    Citations

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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. Chaiken, Benjamin & Duggan, Joseph E., 2024. "A note on the uniqueness of Nash–Cournot equilibria in an oligopolistic energy market with renewable generation and demand uncertainty," Energy Economics, Elsevier, vol. 138(C).
    3. Crampes, Claude & Renault, Jérôme, 2022. "Supply Flexibility and risk transfer in electricity markets," TSE Working Papers 22-1350, Toulouse School of Economics (TSE), revised Sep 2023.
    4. Sirin, Selahattin Murat & Camadan, Ercument & Erten, Ibrahim Etem & Zhang, Alex Hongliang, 2023. "Market failure or politics? Understanding the motives behind regulatory actions to address surging electricity prices," Energy Policy, Elsevier, vol. 180(C).
    5. Mier, Mathias, 2021. "Efficient pricing of electricity revisited," Energy Economics, Elsevier, vol. 104(C).
    6. Crampes, Claude & Renault, Jérôme, 2021. "Imperfect competition in electricity markets with partially flexible technologies," TSE Working Papers 21-1198, Toulouse School of Economics (TSE).

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    More about this item

    Keywords

    Flexibility; Electricity; Production costs; Day-ahead market; Intraday market; Competition;
    All these keywords.

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • D47 - Microeconomics - - Market Structure, Pricing, and Design - - - Market Design
    • L23 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Organization of Production
    • L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities

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