Production cost minimization versus consumer payment minimization in electricity pools

Algorithms that involve some kind of optimization have been adopted by several electricity pools as a tool to clear the market. Traditionally, this kind of models were used on a cost minimizing basis, but recent papers have pointed out that alternative dispatches may be obtained that, even with high...

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Bibliographic Details
Published in:IEEE transactions on power systems 2002-02, Vol.17 (1), p.119-127
Main Authors: Vazquez, C., Rivier, M., Perez-Arriaga, I.J.
Format: Article
Language:English
Subjects:
Cost function
Economics
Electricity
Energy consumption
Environmental economics
Industrial engineering
Investments
Manufacturing engineering
Microeconomics
Minimization
Optimization
Pools
Power generation economics
Power markets
Power system economics
Power systems
Production
Production costs
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Summary:Algorithms that involve some kind of optimization have been adopted by several electricity pools as a tool to clear the market. Traditionally, this kind of models were used on a cost minimizing basis, but recent papers have pointed out that alternative dispatches may be obtained that, even with higher production costs, result in lower electricity prices for consumers. This paper studies this new payment-minimization approach, including the long-term economic signals that it provides and their impact on future investments. The authors results show that minimizing consumer payment results in discriminatory scheduling for certain generation resources and may cause, in the long-run, higher prices for consumers.
ISSN:0885-8950
1558-0679
DOI:10.1109/59.982202