Equilibrium Predictions in Wholesale Electricity Markets

We review supply function equilibrium models and their predictions on market outcomes in the wholesale electricity auctions. We discuss how observable market characteristics such as capacity constraints, number of power suppliers, load distribution and auction format affect the behavior of suppliers and performance of the market. We specifically focus on the possible market power exerted by pivotal suppliers and the comparison between discriminatory and uniform-price auctions. We also describe capacity investment behavior of electricity producers in the restructured industry.Electricity markets; Supply function equilibrium; Markov perfect equilibrium; electricity auctions; pivotal suppliers; capacity investment.

Electricity Trade Patterns in a Network: Evidence from the Ontario Market

We investigate whether trade has any effect on the price formation process in a specific electricity market, and identify interconnected markets that have higher impacts on prices in that market. In particular, we study Ontario wholesale electricity market and its trade with 12 interconnected markets including New York, Michigan, and Minnesota markets. We find that imports are unambiguously related to prices, while exports are not. Furthermore, imports have a positive and significant relationship with prices. We argue that the results are associated with auction design, production constraints, and technological differences. Out of the 12 studied interties, only three have a significant impact on price, two of which are the largest ones.electricity trade; simultaneous trade; transmission network; electricity prices; nonlinear Granger causality; Ontario, New York, Michigan, Manitoba, Quebec wholesale electricity markets.

Environmentally Damaging Electricity Trade

Electricity trade across regions is often considered welfare enhancing. We show in this paper that this could be reconsidered if environmental externalities are taken into account. We consider two cases where trade is beneficial, before accounting for environmental damages: first, when two regions with the same technology display some demand heterogeneity; second when one region endowed with hydropower arbitrages with its "thermal" neighbor. Our results show that under reasonable demand and supply elasticities, trade comes with an additional environmental cost. This calls for integrating environmental externalities into market reforms when redesigning the electricity sector. Two North American applications illustrate our results: trade between Pennsylvania and New York, and trade between hydro-rich Quebec and New York

Regulation and electricity market integration: When trade introduces inefficiencies

Electricity markets vary greatly across jurisdictions, in terms of regulatory institutions, cost levels and environmental impacts. Integrating such different markets can lead to significant changes. This paper considers two jurisdictions - one with a regulated monopoly selling at average cost and one with a competitive market - and compares three different institutional regimes: autarky, a mixed-market structure with trade and a fully integrated market, where electricity is sold at marginal cost. We show that, in the second regime, the regulated monopoly always exports toward the jurisdiction pricing at marginal cost, up to inducing productive inefficiencies. By contrast, a shift from the second to the third regime, i.e. "integrated deregulation" yields a decrease in overall consumption. We identify the exact conditions under which the shift from one regime to the other results in environmental gains

Integrating Thermal and Hydro Electricity Markets: Economic and Environmental Costs of not Harmonizing Pricing Rules

The electricity sector is the largest source of GHG emissions in the world, and reducing these emissions would often be costly. However, because electricity markets remain often only integrated at a shallow level (with different pricing regulations), many gains from deeper integration (adoption of marginal cost pricing everywhere) are yet to capture. This paper assesses the benefits of such deep integration between a "hydro" jurisdiction and a "thermal" one. It also underscores the inefficiency of trade when pricing rules differ. Our detailed hourly model, calibrated with real data (from the provinces of Ontario and Quebec, Canada), estimates price, consumption, emissions and welfare changes associated to fully integrating electricity markets, under transmission constraints. A negative abatement cost of $37/tonne of CO2 is found (for more than 1 million tonnes), cleary illustrating the untapped potential of wealth creation in carbon reduction initiatives. Furthermore, given the inefficiency of shallow integration between markets, we find that removing interconnections between markets is a relatively affordable CO2-reduction opportunity, at$21.5/tonne

Implications of integrating electricity supply dynamics into life cycle assessment: a case study of renewable distributed generation

Electricity supply is frequently cited as a significant hot spot in life cycle assessment (LCA) results. Despite its importance, however, LCA research continues to overuse simplified methodologies regarding electricity supply modeling. This work aims to demonstrate the usefulness of electricity trade analysis (proposed model) for integrating the short-term dynamics of electricity supply and refining LCA results. Distributed generation using renewable energy is applied as a case study to demonstrate how electricity trade analysis provides more refined estimates when environmental impact abatements are assessed compared with the conventional (simplified) approaches in LCA. Grid-connected photovoltaic panel (3 kWp mono- and poly-crystalline) and micro-wind turbine (1, 10 and 30 kW) environmental impact abatements are investigated by determining the displaced marginal electricity production on an hourly basis. The results indicate that environmental impact abatements calculated using the developed short-term time horizon approach can be significantly different (up to 200% difference) from those obtained using a simplified approach. Recommendations are provided to LCA practitioners to address this issue of differing results

Implications of integrating electricity supply dynamics into life cycle assessment: a case study of renewable distributed generation

Electricity supply is frequently cited as a significant hot spot in life cycle assessment (LCA) results. Despite its importance, however, LCA research continues to overuse simplified methodologies regarding electricity supply modeling. This work aims to demonstrate the usefulness of electricity trade analysis (proposed model) for integrating the short-term dynamics of electricity supply and refining LCA results. Distributed generation using renewable energy is applied as a case study to demonstrate how electricity trade analysis provides more refined estimates when environmental impact abatements are assessed compared with the conventional (simplified) approaches in LCA. Grid-connected photovoltaic panel (3 kWp mono- and poly-crystalline) and micro-wind turbine (1, 10 and 30 kW) environmental impact abatements are investigated by determining the displaced marginal electricity production on an hourly basis. The results indicate that environmental impact abatements calculated using the developed short-term time horizon approach can be significantly different (up to 200% difference) from those obtained using a simplified approach. Recommendations are provided to LCA practitioners to address this issue of differing results

Influence of wind power on hourly electricity prices and GHG emissions: Evidence that congestion matters from Ontario zonal data

With the growing share of wind production, understanding its impacts on electricity price and greenhouse gas (GHG) emissions becomes increasingly relevant, especially to design better wind-supporting policies. Internal grid congestion is usually not taken into account when assessing the price impact of fluctuating wind output. Using 2006-2011 hourly data from Ontario (Canada) , we establish that the impact of wind output, both on price level and marginal GHG emissions, greatly differs depending on the congestion level. Indeed, from a 3.3% price reduction when wind production doubles, the reduction jumps to 5.5% during uncongested hours, but is only 0.8% when congestion prevails. Similarly, avoided GHG emissions due to wind are estimated to 331.93 kilograms per megawatt-hour (kg/MWh) using all data, while for uncongested and congested hours, estimates are respectively 283.49 and 393.68 kg/MWh. These empirical estimates, being based on 2006-2011 Ontario data, cannot be generalized to other contexts. The main contribution of this paper is to underscore the importance of congestion in assessing the price and GHG impacts of wind. We also contribute by developing an approach to create clusters of data according to the congestion status and location. Finally, we compare different approaches to estimate avoided GHG emissions

Influence of wind power on hourly electricity prices and GHG emissions: Evidence that congestion matters from Ontario zonal data

With the growing share of wind production, understanding its impacts on electricity price and greenhouse gas (GHG) emissions becomes increasingly relevant, especially to design better wind-supporting policies. Internal grid congestion is usually not taken into account when assessing the price impact of fluctuating wind output. Using 2006-2011 hourly data from Ontario (Canada) , we establish that the impact of wind output, both on price level and marginal GHG emissions, greatly differs depending on the congestion level. Indeed, from a 3.3% price reduction when wind production doubles, the reduction jumps to 5.5% during uncongested hours, but is only 0.8% when congestion prevails. Similarly, avoided GHG emissions due to wind are estimated to 331.93 kilograms per megawatt-hour (kg/MWh) using all data, while for uncongested and congested hours, estimates are respectively 283.49 and 393.68 kg/MWh. These empirical estimates, being based on 2006-2011 Ontario data, cannot be generalized to other contexts. The main contribution of this paper is to underscore the importance of congestion in assessing the price and GHG impacts of wind. We also contribute by developing an approach to create clusters of data according to the congestion status and location. Finally, we compare different approaches to estimate avoided GHG emissions

Influence of wind power on hourly electricity prices and GHG emissions: Evidence that congestion matters from Ontario zonal data

With the growing share of wind production, understanding its impacts on electricity price and greenhouse gas (GHG) emissions becomes increasingly relevant, especially to design better wind-supporting policies. Internal grid congestion is usually not taken into account when assessing the price impact of fluctuating wind output. Using 2006-2011 hourly data from Ontario (Canada) , we establish that the impact of wind output, both on price level and marginal GHG emissions, greatly differs depending on the congestion level. Indeed, from a 3.3% price reduction when wind production doubles, the reduction jumps to 5.5% during uncongested hours, but is only 0.8% when congestion prevails. Similarly, avoided GHG emissions due to wind are estimated to 331.93 kilograms per megawatt-hour (kg/MWh) using all data, while for uncongested and congested hours, estimates are respectively 283.49 and 393.68 kg/MWh. These empirical estimates, being based on 2006-2011 Ontario data, cannot be generalized to other contexts. The main contribution of this paper is to underscore the importance of congestion in assessing the price and GHG impacts of wind. We also contribute by developing an approach to create clusters of data according to the congestion status and location. Finally, we compare different approaches to estimate avoided GHG emissions