Competitive electricity markets and investment in new generating capacity
Evidence from the U.S. and some other countries indicates that organized wholesale markets for electrical energy and operating reserves do not provide adequate incentives to stimulate the proper quantity or mix of generating capacity consistent with mandatory reliability criteria. A large part of th...
| Main Author: | |
|---|---|
| Other Authors: | |
| Format: | Working Paper |
| Published: |
MIT Center for Energy and Environmental Policy Research
2009
|
| Subjects: | |
| Online Access: | http://hdl.handle.net/1721.1/45055 |
| _version_ | 1826193090424078336 |
|---|---|
| author | Joskow, Paul L. |
| author2 | Massachusetts Institute of Technology. Center for Energy and Environmental Policy Research. |
| author_facet | Massachusetts Institute of Technology. Center for Energy and Environmental Policy Research. Joskow, Paul L. |
| author_sort | Joskow, Paul L. |
| collection | MIT |
| description | Evidence from the U.S. and some other countries indicates that organized wholesale markets for electrical energy and operating reserves do not provide adequate incentives to stimulate the proper quantity or mix of generating capacity consistent with mandatory reliability criteria. A large part of the problem can be associated with the failure of wholesale spot market prices for energy and operating reserves to rise to high enough levels during periods when generating capacity is fully utilized. Reforms to wholesale energy markets, the introduction of well-design forward capacity markets, and symmetrical treatment of demand response and generating capacity resources to respond to market and institutional imperfections are discussed. This policy reform program is compatible with improving the efficiency of spot wholesale electricity markets, the continued evolution of competitive retail markets, and restores incentives for efficient investment in generating capacity consistent with operating reliability criteria applied by system operators. It also responds to investment disincentives that have been associated with volatility in wholesale energy prices, limited hedging opportunities and to concerns about regulatory opportunism. |
| first_indexed | 2024-09-23T09:33:35Z |
| format | Working Paper |
| id | mit-1721.1/45055 |
| institution | Massachusetts Institute of Technology |
| last_indexed | 2024-09-23T09:33:35Z |
| publishDate | 2009 |
| publisher | MIT Center for Energy and Environmental Policy Research |
| record_format | dspace |
| spelling | mit-1721.1/450552019-04-12T09:56:21Z Competitive electricity markets and investment in new generating capacity Joskow, Paul L. Massachusetts Institute of Technology. Center for Energy and Environmental Policy Research. Electric utilities Electric power consumption Electric power-plants Evidence from the U.S. and some other countries indicates that organized wholesale markets for electrical energy and operating reserves do not provide adequate incentives to stimulate the proper quantity or mix of generating capacity consistent with mandatory reliability criteria. A large part of the problem can be associated with the failure of wholesale spot market prices for energy and operating reserves to rise to high enough levels during periods when generating capacity is fully utilized. Reforms to wholesale energy markets, the introduction of well-design forward capacity markets, and symmetrical treatment of demand response and generating capacity resources to respond to market and institutional imperfections are discussed. This policy reform program is compatible with improving the efficiency of spot wholesale electricity markets, the continued evolution of competitive retail markets, and restores incentives for efficient investment in generating capacity consistent with operating reliability criteria applied by system operators. It also responds to investment disincentives that have been associated with volatility in wholesale energy prices, limited hedging opportunities and to concerns about regulatory opportunism. 2009-04-03T17:07:19Z 2009-04-03T17:07:19Z 2006 Working Paper 2006-009 http://hdl.handle.net/1721.1/45055 159939212 MIT-CEEPR (Series) ; 06-009WP. [i], 61, [11] p application/pdf MIT Center for Energy and Environmental Policy Research |
| spellingShingle | Electric utilities Electric power consumption Electric power-plants Joskow, Paul L. Competitive electricity markets and investment in new generating capacity |
| title | Competitive electricity markets and investment in new generating capacity |
| title_full | Competitive electricity markets and investment in new generating capacity |
| title_fullStr | Competitive electricity markets and investment in new generating capacity |
| title_full_unstemmed | Competitive electricity markets and investment in new generating capacity |
| title_short | Competitive electricity markets and investment in new generating capacity |
| title_sort | competitive electricity markets and investment in new generating capacity |
| topic | Electric utilities Electric power consumption Electric power-plants |
| url | http://hdl.handle.net/1721.1/45055 |
| work_keys_str_mv | AT joskowpaull competitiveelectricitymarketsandinvestmentinnewgeneratingcapacity |