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Electricity Scarcity Pricing Through Operating Reserves

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  • William W. Hogan

Abstract

Suppressed prices in real-time markets provide inadequate incentives for both generation investment and active participation by demand bidding. An operating reserve demand curve developed from first principles would improve reliability, support adequate scarcity pricing, and be straightforward to implement within the framework of economic dispatch. This approach would be fully compatible with other market-oriented policies. Better scarcity pricing would also contribute to long-term resource adequacy.

Suggested Citation

  • William W. Hogan, 2013. "Electricity Scarcity Pricing Through Operating Reserves," Economics of Energy & Environmental Policy, International Association for Energy Economics, vol. 0(Number 2).
    • Handle: RePEc:aen:eeepjl:2_2_a04
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    References listed on IDEAS

    as
    1. Paul Joskow & Jean Tirole, 2007. "Reliability and competitive electricity markets," RAND Journal of Economics, RAND Corporation, vol. 38(1), pages 60-84, March.
    2. Byong-Hun Ahn & William W. Hogan, 1982. "On Convergence of the PIES Algorithm for Computing Equilibria," Operations Research, INFORMS, vol. 30(2), pages 281-300, April.
    3. Hogan, William W, 2002. "Electricity Market Restructuring: Reforms of Reforms," Journal of Regulatory Economics, Springer, vol. 21(1), pages 103-132, January.
    4. David M. Newbery, 1995. "Power Markets and Market Power," The Energy Journal, International Association for Energy Economics, vol. 0(Number 3), pages 39-66.
    5. Joskow, Paul L., 2008. "Capacity payments in imperfect electricity markets: Need and design," Utilities Policy, Elsevier, vol. 16(3), pages 159-170, September.
    6. Michael L. Telson, 1975. "The Economies of Alternative Levels of Reliability for Electric Power Generation Systems," Bell Journal of Economics, The RAND Corporation, vol. 6(2), pages 679-694, Autumn.
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    JEL classification:

    • F0 - International Economics - - General

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