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Measuring Gains from Regional Dispatch: Coal-Fired Power Plant Utilization and Market Reforms

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  • Stratford Douglas

Abstract

This paper examines changes in the utilization rates (annual capacity factors) of coal-burning power plants in the eastern United States after 1996, when federal regulators opened the transmission system to wholesale power markets. This and other accompanying market-oriented reforms were intended to improve efficiency by encouraging regional dispatch by independent system operators. If the reforms made dispatch more efficient, then utilization rates of high-cost plants should have fallen relative to those of low-cost plants since 1996. A difference-in-difference model using plant-level panel data indicates that relative utilization rates of high-cost plants did indeed fall after 1996, but only in regions with independent system operators. Simulations indicate cost savings on the order of two to three percent.

Suggested Citation

  • Stratford Douglas, 2006. "Measuring Gains from Regional Dispatch: Coal-Fired Power Plant Utilization and Market Reforms," The Energy Journal, , vol. 27(1), pages 119-138, January.
    • Handle: RePEc:sae:enejou:v:27:y:2006:i:1:p:119-138
    DOI: 10.5547/ISSN0195-6574-EJ-Vol27-No1-7
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    Cited by:

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    2. Matthew Barmack & Edward Kahn & Susan Tierney, 2007. "A cost-benefit assessment of wholesale electricity restructuring and competition in New England," Journal of Regulatory Economics, Springer, vol. 31(2), pages 151-184, April.
    3. Chu, Yin & Chang, Chun-Ping, 2020. "Vertical separation of transmission control and market efficiency in the wholesale electricity market," The North American Journal of Economics and Finance, Elsevier, vol. 51(C).
    4. Michael G. Pollitt, 2011. "Lessons from the History of Independent System Operators in the Energy Sector, with applications to the Water Sector," Working Papers EPRG 1125, Energy Policy Research Group, Cambridge Judge Business School, University of Cambridge.
    5. Andreas Ferrara & Ian Lange, 2014. "Voluntary Programs to Encourage Diffusion: The Case of the Combined Heat-and-Power Partnership," The Energy Journal, , vol. 35(1), pages 161-174, January.
    6. Chan, H. Ron & Fell, Harrison & Lange, Ian & Li, Shanjun, 2017. "Efficiency and environmental impacts of electricity restructuring on coal-fired power plants," Journal of Environmental Economics and Management, Elsevier, vol. 81(C), pages 1-18.
    7. Arina Nikandrova & Jevgenijs Steinbuks, 2017. "Contracting for the second best in dysfunctional electricity markets," Journal of Regulatory Economics, Springer, vol. 51(1), pages 41-71, February.
    8. Pollitt, Michael G., 2012. "Lessons from the history of independent system operators in the energy sector," Energy Policy, Elsevier, vol. 47(C), pages 32-48.
    9. Oseni, Musiliu O. & Pollitt, Michael G., 2014. "Institutional arrangements for the promotion of regional integration of electricity markets : international experience," Policy Research Working Paper Series 6947, The World Bank.
    10. Chu, Yin & Gao, Juanxia & Li, Haoyang, 2023. "Wind power expansion and regional allocative efficiency among fossil-fuel electricity generators," International Journal of Industrial Organization, Elsevier, vol. 91(C).
    11. Karney, Daniel H., 2019. "Electricity market deregulation and environmental regulation: Evidence from U.S. nuclear power," Energy Economics, Elsevier, vol. 84(C).

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    More about this item

    Keywords

    Utilization rates; annual capacity factors; Coal-fired power; Eastern US; efficiency;
    All these keywords.

    JEL classification:

    • F0 - International Economics - - General

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