Electricity markets are broken

Keay, Malcolm

doi:10.26889/9781784670474

Cited by 40 publications

(32 citation statements)

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“…The answer to these questions is not easy. Nevertheless, a different approach, based on the literatures, [23][24][25] can be suggested as follows.…”

Section: The Long-term Competition In the Electricity Marketmentioning

confidence: 99%

“…The current European electricity market difficulties are approached in our paper, based in three long texts recently published on the topic. [23][24][25] The three previously mentioned documents generally agree about the cause of the current European electricity markets problems, which is the following. Economic crisis, together with the industrial consumption transfer to Asia, is causing the fall down of electricity consumption in most of the European countries.…”

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confidence: 99%

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Electricity markets in Europe: How to recover the production costs?

Santana

Castro

2019

Int Trans Electr Energ Syst

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Summary Current difficulties of electricity markets in Europe have been highlighted in the literature. The market clearing price does not guarantee the economic sustainability of several technologies, which, nevertheless, are needed for the secure operation of the power system. The solutions to cope with this situation do theoretically work well for optimal systems, its application for real‐life nonoptimal systems being doubtful. The growing deployment rate of technologies with “near zero” marginal cost and payments outside the market are leading to an intermittent generation excess capacity and the reduction of the market clearing price. Other difficulties should be taken into account in today's markets. The issue is if the remuneration of the power plants should be based solely on the spot market. Through the concepts of optimal power system and nonoptimal power system, it is shown that the missing money problem for some technologies may coincide with the over profit problem for other technologies. As a contribution to discuss further this issue, a solution is proposed based on a short‐term energy market complemented with an outside market long‐term capacity payment mechanism, grounded on a Power Purchase Agreement set between a central planning agency and the power plant owner. The proposed solution complies with security of supply, environmental sustainability, and producers' economic viability at minimum cost for the consumers.

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“…The answer to these questions is not easy. Nevertheless, a different approach, based on the literatures, [23][24][25] can be suggested as follows.…”

Section: The Long-term Competition In the Electricity Marketmentioning

confidence: 99%

mentioning

confidence: 99%

Electricity markets in Europe: How to recover the production costs?

Santana

Castro

2019

Int Trans Electr Energ Syst

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“…This approach is based on the assumption that both the reliability and security of the grid are quasipublic goods (Bushnell et al, 2017;Keay, 2016). When a traditional centralized grid was the only viable source of electricity, this approach was understandable and rational (Abbott, 2001) because consumers had limited alternatives.…”

Section: Reflecting Consumer Preferencesmentioning

confidence: 99%

“…The concept of reliability as a public good, however, can be increasingly challenged as it relates to a balancing of supply and demand (Keay, 2016;Keay and Robinson, 2017;Kiesling and Giberson, 2004).…”

Section: Reflecting Consumer Preferencesmentioning

confidence: 99%

Decarbonized market design

Billimoria

Poudineh

2018

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In the face of challenges to energy-only market design under the electricity sector transition, an option considered by many jurisdictions is to incorporate some form of centralized capacity mechanism to respond to shortfalls in the market provision. For example, the UK government has already introduced a formal capacity market. In Germany and Belgium, strategic reserve mechanisms have already been approved and will be introduced shortly. Other markets, such as the National Electricity Market of Australia, are also considering enhancing their existing strategic reserve mechanisms, which would see more standardized and continual procurement of capacity by a noncommercial central agency. Under a market transition where generation is increasingly stochastic and decentralized, two key issues emerge with the above approaches. First, centralized mechanisms put increased focus on the efficiency of central authority decision making and the alignment between performance outcomes for reliability and agency incentives. Second, existing capacity mechanisms require the central agency to infer consumer preferences for reliability, something that is very challenging in practice. This is especially relevant in markets where the value of lost load is increasingly differentiated among different consumers. In this paper, we propose a new model for electricity market design-the insurer-of-lastresort model-that works as a risk overlay on an existing energy-only market. This model unbundles energy and reliability and incorporates insurance-based risk management concepts with the aims of (1) aligning incentives for centralized decision making and (2) allowing revealed consumer preferences to guide new capacity deployment.iii

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“…There is emerging discussion about whether restructured wholesale energy markets are ‘broken’ (Keay ). The core of the discussion is the collision of climate change and renewable energy policies with electricity market operation and design (Nelson et al .…”

Section: Introductionmentioning

confidence: 99%

Decarbonisation and wholesale electricity market design

Nelson

Orton

Chappel

2018

Aus J Agri & Res Econ

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In recent decades, many power systems have introduced electricity generator competition. Market designs have varied with some countries adopting ‘energy‐only’ markets and others utilising capacity remuneration mechanisms. With increasing deployment of cost competitive renewable energy and the introduction of policy measures to reduce greenhouse gas emissions, concerns are emerging about the sustainability of these market designs. In Australia, wholesale electricity prices have increased markedly – the result of a ‘disorderly’ transition away from coal to new renewable energy. This paper critically examines the ‘energy‐only’ market in a high‐penetration renewables system, with a particular focus on the vertically and horizontally restructured National Electricity Market (NEM). We propose that the ‘energy‐only’ market can indeed work within a decarbonised energy system. But as renewables increasingly replace coal‐fired power stations, ‘unintended consequences’ will need to be addressed to facilitate an ‘orderly’ transition. It will be important that policy ensures appropriate new investment in firm capacity is forthcoming; and pricing outcomes are acceptable given political economy constraints.

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Electricity markets are broken

Cited by 40 publications

References 1 publication

Electricity markets in Europe: How to recover the production costs?

Electricity markets in Europe: How to recover the production costs?

Decarbonized market design

Decarbonisation and wholesale electricity market design

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