Vertical Integration in Restructured Electricity Markets - read free eBook in online reader or directly download on the web page. Select files or add your book in reader. Download and read online ebook Vertical Integration in Restructured Electricity Markets write by Erin T. Mansur. This book was released on 2003. Vertical Integration in Restructured Electricity Markets available in PDF, EPUB and Kindle. Unlike other studies that have found substantial inefficiencies in restructured electricity markets, this paper provides estimates that reveal relatively competitive behavior in the Pennsylvania, New Jersey, and Maryland market. This distinctive conclusion results from using a model that incorporates structural market features and particular production constraints that are not captured in previous studies. First, the vertical integration of firms in the PJM market reduces electricity producers' interest in setting high prices; producers sell wholesale electricity and also are required to buy power, which they provide to their retail customers at set rates. My model reflects this degree of vertical integration of PJM firms. Second, I account for production constraints that result in cost nonconvexities. Measures of price-cost margins based on a commonly used method that does not incorporate these nonconvexities imply that market imperfections during the summer following PJM's restructuring increased procurement costs 51% ($950 million). That method further implies considerable welfare loss as actual production costs exceeded the competitive model's estimates by 12.5%. This paper develops a consistent estimate of competitive production decisions that respect important production constraints, and it presents estimates showing that costs were only 3.4% above competitive levels. Using this new method of estimating production, I compare behavior of two producers that have relatively few retail customers with other firms. Consistent with these vertically integrated firms' incentives, only firms with large net selling positions in the market reduced output relative to competitive production estimates.
Vertical Integration and the Restructuring of the U.S. Electricity Industry
Vertical Integration and the Restructuring of the U.S. Electricity Industry - read free eBook in online reader or directly download on the web page. Select files or add your book in reader. Download and read online ebook Vertical Integration and the Restructuring of the U.S. Electricity Industry write by Robert J. Michaels. This book was released on 2004. Vertical Integration and the Restructuring of the U.S. Electricity Industry available in PDF, EPUB and Kindle. Debates on restructuring of the U.S. electricity industry are often about the degree to which market relationships should replace transactions that formerly took place within regulated, vertically integrated utilities. Markets for the purchase of energy by vertically unintegrated distribution utilities are clearly feasible, but vertical deintegration of existing systems may entail foregoing some operational and reliability benefits that are important in light of electricity's unique characteristics. Research and policy on restructuring have almost totally disregarded a large econometric literature on the savings from vertical integration. At the same time, policy makers have accepted the results of flawed studies that purport to estimate the benefits of switching to a market regime. A review of California's restructuring history shows that vertical integration was viewed primarily as a tool that incumbent utilities might use to perpetuate their market power. The disregard of its benefits led to questionable divestitures that produced superficially competitive market structures, and to the institution of Independent System Operators whose costs have yet to be compared to their benefits.
Vertical Integration and Market Power in Electricity Markets
Vertical Integration and Market Power in Electricity Markets - read free eBook in online reader or directly download on the web page. Select files or add your book in reader. Download and read online ebook Vertical Integration and Market Power in Electricity Markets write by Seamus Hogan. This book was released on 2019. Vertical Integration and Market Power in Electricity Markets available in PDF, EPUB and Kindle. Vertical separation of generation from electricity retailing has often been required as a condition of electricity market liberalisation. A well-developed and liquid contracts market is similarly suggested as necessary to manage the resulting wholesale market risks, which risks are further exacerbated by competition. Such contracts markets are rare, however, and increasingly evidence is emerging that vertical integration is associated not just with improved wholesale market risk management, but also reduced wholesale market power. This paper develops a theoretical model showing that non-vertically integrated generators will over-report their inverse supply curves, with the incentive to over-report increasing with the firm's share of generating capacity. Conversely, in a vertically integrated industry, no over-reporting occurs when integrated firms have balanced shares in wholesale and retail markets. In general, firms whose share of generating capacity is higher (lower) than their retail market share will over-report (under-report) their inverse supply functions. Integration is found to affect retail electricity prices only via its effect on retail marginal costs. We find that retail prices are higher with vertical separation than with either balanced integration, or full integration without a wholesale market. These results suggest a re-evaluation of the importance of generator wholesale market power in vertically integrated electricity industries, and of measures to improve retail market competitiveness under either vertical integration or separation.
Vertical Arrangements, Market Structure, and Competition
Vertical Arrangements, Market Structure, and Competition - read free eBook in online reader or directly download on the web page. Select files or add your book in reader. Download and read online ebook Vertical Arrangements, Market Structure, and Competition write by James Bushnell. This book was released on 2005. Vertical Arrangements, Market Structure, and Competition available in PDF, EPUB and Kindle. This paper examines the relative importance of horizontal market structure, auction design, and vertical arrangements in explaining electricity prices. We define vertical arrangements as either vertical integration or long term contracts whereby retail prices are determined prior to wholesale prices. This is generally the case in electricity markets. These ex ante retail price commitments mean that a producer has effectively entered into a forward contract when it takes on retail customers. The integrated firm has less incentive to raise wholesale prices when its sale price is constrained. For three restructured wholesale electricity markets, we simulate two sets of prices that define the bounds on static oligopoly equilibria. Our findings suggest that vertical arrangements dramatically affect estimated market outcomes. Simulated prices that assume Cournot behavior but ignore this vertical scope vastly exceed observed prices. After accounting for the arrangements, performance is similar to Cournot in each market. Our results indicate that auction design has done little to limit strategic behavior and that horizontal market structure accurately predicts market performance only when vertical structure is also taken into account.
Operation of Restructured Power Systems
Operation of Restructured Power Systems - read free eBook in online reader or directly download on the web page. Select files or add your book in reader. Download and read online ebook Operation of Restructured Power Systems write by Kankar Bhattacharya. This book was released on 2012-12-06. Operation of Restructured Power Systems available in PDF, EPUB and Kindle. Deregulation is a fairly new paradigm in the electric power industry. And just as in the case of other industries where it has been introduced, the goal of deregulation is to enhance competition and bring consumers new choices and economic benefits. The process has, obviously, necessitated reformulation of established models of power system operation and control activities. Similarly, issues such as system reliability, control, security and power quality in this new environment have come in for scrutiny and debate. In this book, we attempt to present a comprehensive overview of the deregulation process that has developed till now, focussing on the operation aspects. As of now, restructured electricity markets have been established in various degrees and forms in many countries. This book comes at a time when the deregulation process is poised to undergo further rapid advancements. It is envisaged that the reader will benefit by way of an enhanced understanding of power system operations in the conventional vertically integrated environment vis-a-vis the deregulated environment. The book is aimed at a wide range of audience- electric utility personnel involved in scheduling, dispatch, grid operations and related activities, personnel involved in energy trading businesses and electricity markets, institutions involved in energy sector financing. Power engineers, energy economists, researchers in utilities and universities should find the treatment of mathematical models as well as emphasis on recent research work helpful.
