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Composition of Electricity Generation Portfolios, Pivotal Dynamics, and Market Prices

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  • Albert Banal-Estañol

    (Department of Economics, City University London, Northampton Square, London EC1V 0HB, United Kingdom; and Department of Economics and Business, Universitat Pompeu Fabra and Barcelona Graduate School of Economics, 08005 Barcelona, Spain)

  • Augusto Rupérez Micola

    (Department of Economics and Business, Universitat Pompeu Fabra and Barcelona Graduate School of Economics, 08005 Barcelona, Spain)

Abstract

We use simulations to study how the diversification of electricity generation portfolios influences wholesale prices. We find that the relationship between technological diversification and market prices is mediated by the supply-to-demand ratio. In each demand case there is a threshold where pivotal dynamics change. Pivotal dynamics pre- and post-threshold are the cause of nonlinearities in the influence of diversification on market prices. The findings are robust to changes in the main market assumptions.

Suggested Citation

  • Albert Banal-Estañol & Augusto Rupérez Micola, 2009. "Composition of Electricity Generation Portfolios, Pivotal Dynamics, and Market Prices," Management Science, INFORMS, vol. 55(11), pages 1813-1831, November.
    • Handle: RePEc:inm:ormnsc:v:55:y:2009:i:11:p:1813-1831
    DOI: 10.1287/mnsc.1090.1067
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    3. Anderson, Edward & Holmberg, Pär, 2018. "Price instability in multi-unit auctions," Journal of Economic Theory, Elsevier, vol. 175(C), pages 318-341.
    4. Mohammad Rasouli & Demosthenis Teneketzis, 2021. "Economizing the Uneconomic: Markets for Reliable, Sustainable, and Price Efficient Electricity," Sustainability, MDPI, vol. 13(8), pages 1-38, April.
    5. Banal-Estañol, Albert & Rupérez Micola, Augusto, 2011. "Behavioural simulations in spot electricity markets," European Journal of Operational Research, Elsevier, vol. 214(1), pages 147-159, October.
    6. Young, David & Poletti, Stephen & Browne, Oliver, 2014. "Can agent-based models forecast spot prices in electricity markets? Evidence from the New Zealand electricity market," Energy Economics, Elsevier, vol. 45(C), pages 419-434.
    7. Steeger, Gregory & Rebennack, Steffen, 2017. "Dynamic convexification within nested Benders decomposition using Lagrangian relaxation: An application to the strategic bidding problem," European Journal of Operational Research, Elsevier, vol. 257(2), pages 669-686.
    8. Filomena, Tiago Pascoal & Campos-Náñez, Enrique & Duffey, Michael Robert, 2014. "Technology selection and capacity investment under uncertainty," European Journal of Operational Research, Elsevier, vol. 232(1), pages 125-136.
    9. 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.
    10. Lin-Ju Chen & Lei Zhu & Ying Fan & Sheng-Hua Cai, 2013. "Long-Term Impacts of Carbon Tax and Feed-in Tariff Policies on China's Generating Portfolio and Carbon Emissions: A Multi-Agent-Based Analysis," Energy & Environment, , vol. 24(7-8), pages 1271-1293, December.
    11. Daron Acemoglu, Ali Kakhbod, and Asuman Ozdaglar, 2017. "Competition in Electricity Markets with Renewable Energy Sources," The Energy Journal, International Association for Energy Economics, vol. 0(KAPSARC S).
    12. Bunn, Derek W. & Oliveira, Fernando S., 2016. "Dynamic capacity planning using strategic slack valuation," European Journal of Operational Research, Elsevier, vol. 253(1), pages 40-50.

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