Wholesale marginal prices in competitive generation markets

Wholesale marginal electricity prices are being used in several actual competitive generation markets worldwide, both to remunerate generators and to charge consumption. These prices must account not only for energy, but also for guarantee of supply in the long and the short term. This paper: (a) pr...

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Bibliographic Details
Published in:IEEE transactions on power systems 1997-05, Vol.12 (2), p.710-717
Main Authors: Perez-Arriaga, I.J., Meseguer, C.
Format: Article
Language:English
Subjects:
Applied sciences
Cost function
Decision making
Economic data
Electric energy
Energy
Energy consumption
Energy economics
Exact sciences and technology
General, economic and professional studies
Methodology. Modelling
Power generation
Power generation economics
Power system economics
Power system modeling
Power system planning
Power system security
Pricing
Q1
Signal generators
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Summary:Wholesale marginal electricity prices are being used in several actual competitive generation markets worldwide, both to remunerate generators and to charge consumption. These prices must account not only for energy, but also for guarantee of supply in the long and the short term. This paper: (a) provides a sound conceptual and quantitative foundation for wholesale pricing based on generation services, where any existing restrictions in operation or planning in real power markets are accounted for; (b) clearly establishes the relationship between short term marginal costs, long term marginal costs and optimal wholesale electricity prices; and (c) identifies the reasons for mismatches in cost recovery with marginal generation prices. The theoretical results are verified with a detailed realistic power system model.
ISSN:0885-8950
1558-0679
DOI:10.1109/59.589661