Electricity Market Design and Efficient Pricing: Applications for New England and Beyond

The basic design of successful organized electricity markets is built on the principles of bid-based, security-constrained economic dispatch. However, the real electricity system involves features that are difficult or impossible to fully reconcile within this core model. This calls for an applicati...

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Bibliographic Details
Published in:The Electricity journal 2014-08, Vol.27 (7), p.23-49
Main Author: Hogan, William W.
Format: Article
Language:English
Subjects:
Electric power
Energy policy
New England
Payment
Prices
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Summary:The basic design of successful organized electricity markets is built on the principles of bid-based, security-constrained economic dispatch. However, the real electricity system involves features that are difficult or impossible to fully reconcile within this core model. This calls for an application of the principles of dispatched-based pricing to move as far as possible to achieving the ideal of efficient pricing and minimizing the need for additional payments through uplift and other interventions to maintain reliability. Motivated by issues under review in New England, a summary of the basic principles and illustrative applications provides examples of seeking the first-best efficient prices to mitigate the unintended consequences of second-best out-of-market payments.
ISSN:1040-6190
1873-6874
DOI:10.1016/j.tej.2014.07.009