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Electricity supply security: Cost efficiency of providing security and diversified consumer level

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  • Klinge Jacobsen, Henrik
  • Jensen, Stine Grenaa

Abstract

Security of supply in electricity is questioned in liberalised markets as it is often characterised as a public good. We examine if this can be modified allowing for creation of security markets, which can be justified by welfare gains. From a welfare perspective it is possible that security levels are too high and obtained with too high costs. An efficiency improvement might be to adjust the effort so that marginal cost for securing supply are at similar levels in generation capacity and in network maintenance. Secondarily, a consumer defined level of security might improve welfare. Finally, different willingness to pay among customers and construction of advanced markets might increase welfare further.

Suggested Citation

  • Klinge Jacobsen, Henrik & Jensen, Stine Grenaa, 2009. "Electricity supply security: Cost efficiency of providing security and diversified consumer level," MPRA Paper 41707, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:41707
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    References listed on IDEAS

    as
    1. Paul Joskow & Jean Tirole, 2007. "Reliability and competitive electricity markets," RAND Journal of Economics, RAND Corporation, vol. 38(1), pages 60-84, March.
    2. Rochlin, Cliff, 2004. "Resource Adequacy Requirement, Reserve Margin, and the Public Goods Argument," The Electricity Journal, Elsevier, vol. 17(3), pages 52-59, April.
    3. Mas-Colell, Andreu & Whinston, Michael D. & Green, Jerry R., 1995. "Microeconomic Theory," OUP Catalogue, Oxford University Press, number 9780195102680.
    4. Abbott, Malcolm, 2001. "Is the Security of Electricity Supply a Public Good?," The Electricity Journal, Elsevier, vol. 14(7), pages 31-33.
    5. de Nooij, Michiel & Koopmans, Carl & Bijvoet, Carlijn, 2007. "The value of supply security: The costs of power interruptions: Economic input for damage reduction and investment in networks," Energy Economics, Elsevier, vol. 29(2), pages 277-295, March.
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    More about this item

    Keywords

    security of supply; electricity market; public goods;
    All these keywords.

    JEL classification:

    • H4 - Public Economics - - Publicly Provided Goods
    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices
    • L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities

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