Towards long-term economic welfare in deregulated electricity markets: Testing capacity mechanisms in an experimental setting

Renewable energy sources and the cycles in deregulated electricity markets

“…As expected, a proper adjustment of capacity under construction in both the RES and CES case, produce a significant decrease in price oscillations. This behavior is very similar to the case where the capacity under construction is adjusted to the desired one, which is consistent with previous simulation models [29,33].…”

“…ܲܲ represents the perceived price by the investors, ݀ is the intercept which is the minimum total desired capacity once the ܲܲ is zero, ‫ܥ‬ is the Cournot-Nash production equilibrium and ܲ is Cournot-Nash price equilibrium. This equilibrium was estimated from the first order condition, assuming an interior solution and considering the best response functions [20], which values are consistent with previous simulations [32,34] and experimental studies [29,31,33]. Cost differences are considered in this estimation via quadratic functions, where RES technologies are capital intensive but cheaper to operate.…”

“…The base case model (CES) is identical to a previous model [29] which in turn is based on a simple stock management model [30]. This model has been used to study the effect of mothballing [31], long-term strategic reserve contracting, centralized auctioning [32,33], and forward markets [34]. We extended the original model to research the effect the introduction of renewable energy sources has on capacity cycles.…”

The Impact of Variable Renewable Energy Integration on Total System Costs and Electricity Generation Revenue

“…In terms of assessing the impact of VRE integration, system planners and policymakers must focus on overall costs to determine an optimal system plan and policy options that consider cost structures, minimize the burdens on customers and evaluate the effects on generators that provide supply security [24,[31][32][33][34]. For this purpose, the "total system cost approach" is appropriate.…”

“…The MPs at time t ( () t  ) in a VRE penetration level was derived by the merit-order simulation. The () t  is the function of the merit-order curve and () r Dt, as shown in (31). This paper assumes that the electricity market (energy-only market) is the theoretically perfect competition for which generators will offer the lowest price they can accept without loss to ensure they can be committed to selling the energy [59].…”