A wholesale electricity market design sans missing money and price manipulation

Chi Keung WOO, I. MILSTEIN, A. TISHLER, J. ZARNIKAU

Research output: Contribution to journalArticles

2 Citations (Scopus)

Abstract

Using reliability differentiation via tolling agreements with diverse heat rates and fuel types, we propose an efficient wholesale electricity market design under demand and supply uncertainty. Mainly based on North America's market experience, our proposed design adopts an independent system operator's (ISO's) existing practice of least-cost dispatch of heterogeneous generation units, real-time energy price determination and capacity rationing. It solves the missing money problem of inadequate incentive for thermal generation investment, without requiring the ISO to operate centralized capacity auctions, make capacity payments, set high energy price caps, or subsidize market entry. It preempts independent power producers' price manipulation in the ISO's real-time market for energy, thus easing the ISO's burden of market monitoring. It suggests two-part pricing of end-use consumption and power demand of a load serving entity's retail customers, thus meaningfully linking the wholesale and retail markets. It is applicable to countries that have implemented wholesale competition or are in the process of doing so. Hence, its policy implication is that it should be considered in the ongoing debate of electricity reliability and market competition. Copyright © 2019 Elsevier Ltd. All rights reserved.
Original languageEnglish
Article number110988
JournalEnergy Policy
Volume134
Early online dateSep 2019
DOIs
Publication statusPublished - Nov 2019

Citation

Woo, C. K., Milstein, I., Tishler, A., & Zarnikau, J. (2019). A wholesale electricity market design sans missing money and price manipulation. Energy Policy, 134. Retrieved from https://doi.org/10.1016/j.enpol.2019.110988

Keywords

  • Electricity market design
  • Wholesale competition
  • Reliability differentiation
  • Tolling agreements
  • Missing money
  • Price manipulation

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