Energy Journal. 2019 Special Issue, Vol. 40, p105-126. 22p.
Market power, Markets, Economists, Auctions, Electricity, and Behavior
The transition to a low-carbon power system requires growing the share of generation from (intermittent) renewables while ensuring security of supply. Policymakers and economists increasingly see a capacity mechanism as a way to deal with this challenge. Yet this raises new concerns about the exercise of market power by large players via the capacity auction. We present a new modelling approach that captures such strategic behaviour together with a set of ex ante empirical estimates for the new Irish electricity market design (I-SEM)--in which a single firm controls 44% of generation capacity (excluding wind). We find significant costs of strategic behaviour, even with new entry: In our baseline scenarios, procurement costs in the capacity auction are around 150-400 million EUR (or 40-100%) above the competitive least-cost solution. From a policy perspective, we also examine how market power can be measured and mitigated through auction design. [ABSTRACT FROM AUTHOR]
Energy Journal. 2007, Vol. 28 Issue 1, p113-144. 32p.
Auctions, Economic competition, Energy industries, Electricity, and Interconnected electric utility systems
Scarce interconnector capacities are a severe obstacle to transregional competition and a unified market for electricity in the European Union. However, physically the interconnectors are rarely used up to capacity. This is due to the fact that the current allocation schemes make only limited use of the fact that currents in opposing directions cancel out. We propose a "netting" auction mechanism which makes use of this and in which even small transmission capacities can generate large competitive pressure in adjacent markets. Netting increases the usage of capacity and reduces the auctioneer's incentive to withhold capacity from the auction. [ABSTRACT FROM AUTHOR]
Auctions, Electric utilities, Cost control, and Electricity
Using a complete information game-theoretic model, we analyze the performance of different electricity auction structures in attaining efficiency (i. e., least-cost dispatch). We find that an auction structure where generators are allowed to bid for load "slices" outperforms an auction structure where generators submit bids for different hours in the day. [ABSTRACT FROM AUTHOR]