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Peak-load Pricing with Different Types of Dispatchability

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  • Klaus Eisenack

    (Humboldt-University of Berlin)

  • Mathias Mier

Abstract

We extend the theory of peak-load pricing by considering that the production with different technologies can be adjusted within their capacity at different speeds. In the established analysis, all production decisions can be made after the random variables realize. In our setting, in contrast, some decisions are made before, others after. We consider fixed load and three types of capacities: medium-dispatchable capacity needs to be scheduled ahead of actual production, non-dispatchable capacity produces randomly, and highly-dispatchable capacity can instantly adjust. If capacities differ in their dispatchability, some standard results of peak-load pricing break down, e.g., not all types of capacity will be employed. Either a system with medium-dispatchables only, or a system dominated by non-dispatchables and supplemented by highly-dispatchables occurs, where non- and highly-dispatchables could be substitutes or complements. For the latter system capacity decisions cannot be decentralized by markets since costs recovery is not possible.

Suggested Citation

  • Klaus Eisenack & Mathias Mier, 2018. "Peak-load Pricing with Different Types of Dispatchability," Working Papers V-411-18, University of Oldenburg, Department of Economics, revised Jul 2018.
    • Handle: RePEc:old:dpaper:411
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    Cited by:

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    2. Alexander Haupt, 2023. "Environmental Policy and Renewable Energy in an Imperfectly Competitive Market," CESifo Working Paper Series 10524, CESifo.
    3. Crampes, Claude & Renault, Jérôme, 2019. "How many markets for wholesale electricity when supply ispartially flexible?," Energy Economics, Elsevier, vol. 81(C), pages 465-478.
    4. Mier, Mathias & Weissbart, Christoph, 2020. "Power markets in transition: Decarbonization, energy efficiency, and short-term demand response," Energy Economics, Elsevier, vol. 86(C).
    5. Lang, Corey & Qiu, Yueming (Lucy) & Dong, Luran, 2023. "Increasing voluntary enrollment in time-of-use electricity rates: Findings from a survey experiment," Energy Policy, Elsevier, vol. 173(C).
    6. Crampes, Claude & Renault, Jérôme, 2018. "Supply flexibility in electricity markets," TSE Working Papers 18-964, Toulouse School of Economics (TSE).
    7. Mier, Mathias, 2021. "Efficient pricing of electricity revisited," Energy Economics, Elsevier, vol. 104(C).
    8. Guerra, K. & Haro, P. & Gutiérrez, R.E. & Gómez-Barea, A., 2022. "Facing the high share of variable renewable energy in the power system: Flexibility and stability requirements," Applied Energy, Elsevier, vol. 310(C).
    9. Steinhäuser, J. Micha & Eisenack, Klaus, 2020. "How market design shapes the spatial distribution of power plant curtailment costs," Energy Policy, Elsevier, vol. 144(C).
    10. Neetzow, Paul & Pechan, Anna & Eisenack, Klaus, 2018. "Electricity storage and transmission: Complements or substitutes?," Energy Economics, Elsevier, vol. 76(C), pages 367-377.
    11. Mathias Mier, 2023. "European Electricity Prices in Times of Multiple Crises," ifo Working Paper Series 394, ifo Institute - Leibniz Institute for Economic Research at the University of Munich.
    12. Crampes, Claude & Renault, Jérôme, 2021. "Imperfect competition in electricity markets with partially flexible technologies," TSE Working Papers 21-1198, Toulouse School of Economics (TSE).
    13. Mathias Mier, 2018. "Policy Implications of a World with Renewables, Limited Dispatchability, and Fixed Load," Working Papers V-412-18, University of Oldenburg, Department of Economics, revised Jul 2018.
    14. Dai, Yeming & Sun, Xilian & Qi, Yao & Leng, Mingming, 2021. "A real-time, personalized consumption-based pricing scheme for the consumptions of traditional and renewable energies," Renewable Energy, Elsevier, vol. 180(C), pages 452-466.

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    More about this item

    Keywords

    peak-load pricing; dispatchability; costs revcovery ; market design; renewable engergy; energy transition;
    All these keywords.

    JEL classification:

    • D60 - Microeconomics - - Welfare Economics - - - General
    • L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities
    • L97 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Utilities: General
    • L98 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Government Policy
    • Q21 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Demand and Supply; Prices
    • Q40 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - General

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