283,161 research outputs found

    Equilibria in markets with non-convexities and a solution to the missing money phenomenon in energy markets

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    In this paper we address the issue of finding efficient partial equilibria in markets with non-convexities. This is a problem that has intrigued generation of economists. Beside its theoretical importance this issue is fundamental in energy markets which do not give the right price signals and incentives to maintain existing and invest in new generating capacity. By considering a competitive environment in which consumers maximize utility independently of other agents actions while suppliers are profit maximizers given other market agents actions, we are able to find efficient prices in markets with non-convexities. Based on this result we propose a design for an energy-only market able to give investors the correct price signals.energy markets, equilibrium prices, non convex economies.

    Lead Markets of Environmental Innovations: A Framework for Innovation and Environmental Economics

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    Environmental regulations often want to stimulate the generation and adoption of ecoefficient innovations. An important argument in the public debate is also the creation of new markets for environmentally benign products, processes and services that other countries adopt and therefore generate export opportunities for the pioneering country. The research so far concentrated on the question on how national environmental regulation can induce innovations. The question addressed in this paper is whether environmental regulations can create lead markets, enabling local firms to export innovations that are induced by local market conditions and national regulations. We identify relevant factors for lead markets of environmental innovations. So far, the lead market concept in innovation economics has only been applied to innovations in general. We extend the lead market model to environmentally friendly innovations, considering their peculiarities, in particular the public good character of environmental benefits and the role of regulations. The approach is applied to two case studies: fuel-efficient passenger cars and wind energy. In both cases, one country adopted the innovation first. Later, other countries followed the same innovation design favoured by the lead market. The lead market became a large exporter in the wind generation and car industry respectively. We discuss the regulations employed and the reasons for the international success of the innovations induced by them. We find that strict regulation has created lead markets when it was supported by a global demand or regulatory trend. --Lead markets,technological progress,environmental innovation,wind energy,fuel-efficiency

    Optimal congestion treatment for bilateral electricity trading

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    How to treat transmission constraints in electricity markets that are not based on a pool but on bilateral trading? Three approaches are currently discussed: First, the system operator resolves constraints and socialises costs; second, physical transmission contracts; third, locational charging with the option of financial hedging. Socialisation of costs for constraint resolution results in inefficient dispatch and incorrect incentives for investment in generation. Physical contracts and locational charging designs have identical properties in a very simplified model world, but differ if transaction costs, illiquid markets and uncertainty about demand are considered. Physical transmission contracts are best designed as zonal access rights, but have to be centrally administered to be efficient. Only locational charging can cope with uncertainty and volatility of electricity demand efficiently and non-discriminatory. Qualitative arguments allow ranking of designs involving physical contracts and locational charging. Comparison with a system operator socialising costs requires network specific analysis.Electricity Networks, Constraint Management, Market Design, Bilateral Trading

    Britain's electricity capacity auctions: lessons from Colombia and New England

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    The jury is still out on the need for government-organized capacity markets in order to achieve efficient long-run investments in electricity generation. When new capacity markets are introduced, however, it is important that they are well designed and take account of existing experience and previous design failures. Experience in both Colombia and New England provide a stark warning about the dangers of placing descending clock auctions at the center of electricity capacity markets. Among alternative auction design options, a sealed-bid auction is a better choice

    Britain's electricity capacity auctions: lessons from Colombia and New England

    Get PDF
    The jury is still out on the need for government-organized capacity markets in order to achieve efficient long-run investments in electricity generation. When new capacity markets are introduced, however, it is important that they are well designed and take account of existing experience and previous design failures. Experience in both Colombia and New England provide a stark warning about the dangers of placing descending clock auctions at the center of electricity capacity markets. Among alternative auction design options, a sealed-bid auction is a better choice

    Lead Markets of Environmental Innovations: A Framework for Innovation and Environmental Economics

    Get PDF
    Environmental regulations often want to stimulate the generation and adoption of ecoefficient innovations. An important argument in the public debate is also the creation of new markets for environmentally benign products, processes and services that other countries adopt and therefore generate export opportunities for the pioneering country. The research so far concentrated on the question on how national environmental regulation can induce innovations. The question addressed in this paper is whether environmental regulations can create lead markets, enabling local firms to export innovations that are induced by local market conditions and national regulations. We identify relevant factors for lead markets of environmental innovations. So far, the lead market concept in innovation economics has only been applied to innovations in general. We extend the lead market model to environmentally friendly innovations, considering their peculiarities, in particular the public good character of environmental benefits and the role of regulations. The approach is applied to two case studies: fuel-efficient passenger cars and wind energy. In both cases, one country adopted the innovation first. Later, other countries followed the same innovation design favoured by the lead market. The lead market became a large exporter in the wind generation and car industry respectively. We discuss the regulations employed and the reasons for the international success of the innovations induced by them. We find that strict regulation has created lead markets when it was supported by a global demand or regulatory trend

    Market Design for Generation Adequacy: Healing Causes rather than Symptoms

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    Keywords JEL Classification This paper argues that electricity market reform – particularly the need for complementary mechanisms to remunerate capacity – need to be analysed in the light of the local regulatory and institutional environment. If there is a lack of investment, the priority should be to identify the roots of the problem. The lack of demand side response, short-term reliability management procedures and uncompetitive ancillary services procurement often undermine market reflective scarcity pricing and distort long-term investment incentives. The introduction of a capacity mechanism should come as an optional supplement to wholesale and ancillary markets improvements. Priority reforms should focus on encouraging demand side responsiveness and reducing scarcity price distortions introduced by balancing and congestion management through better dialog between network engineers and market operators. electricity market, generation adequacy, market design, capacity mechanis
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