DocumentCode :
3489028
Title :
Capacity expansion and investment as a function of electricity market structure: Part I - Generation
Author :
Wu, Zhiyong ; Ilic, Marija
Author_Institution :
Carnegie Mellon Univ., Pittsburgh
fYear :
2005
fDate :
27-30 June 2005
Firstpage :
1
Lastpage :
8
Abstract :
This paper concerns the problem of capacity expansion and investment as the electric power industry undergoes major restructuring worldwide. In particular, the objectives of investment in fully regulated industry are compared with the capacity expansion in a spot only market. It is concluded that the incentives in spot only markets depend on the rules for bidding functions into the market: If only short-run marginal cost bidding curves are allowed, and no margin on forecast demand is added, basically no new investment will take place. On the other hand, if it is allowed to bid average costs, instead of short-run marginal costs, this would provide sufficiently strong incentive signals to ensure necessary installed capacity. Given that today´s measurements of market power in the spot market classify any bids higher than the short-run marginal cost as market power, we suggest that it is essential to introduce other means of providing incentives to install capacity in a timely manner. This can be done by designing longer-term physical and/or financial mechanisms for valuing future investments. In this paper we propose a stratum electricity market (SEM) structure which consists of several sequentially clearing sub-markets, ranging from a day-ahead-market (DAM), through month-, season-, year-, five year- and even ten year-forward sub- markets. The performance of this newly proposed SEM is illustrated using simulations on a simple power system in which four different types of generation technologies supply system load.
Keywords :
costing; power markets; DAM; SEM structure; bidding functions; capacity expansion; day-ahead-market; demand forecasting; electricity market structure; short-run marginal cost bidding curves; stratum electricity market; Capacity planning; Costs; Decision making; Electricity supply industry; Investments; Power generation; Power system economics; Power system simulation; Pricing; Public policy; Energy Capacity Markets; Forward Markets; Investments; Stratum Electricity Market (SEM);
fLanguage :
English
Publisher :
ieee
Conference_Titel :
Power Tech, 2005 IEEE Russia
Conference_Location :
St. Petersburg
Print_ISBN :
978-5-93208-034-4
Electronic_ISBN :
978-5-93208-034-4
Type :
conf
DOI :
10.1109/PTC.2005.4524813
Filename :
4524813
Link To Document :
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