Contracting for the Second Best in Dysfunctional Electricity Markets

Power pools constitute a set of sometimes complex institutional arrangements for efficiency-enhancing coordination among power systems. Where such institutional arrangements do not exist, there still can be scope for voluntary electricity-sharing agreements among power systems. This paper uses a particular type of efficient risk-sharing model with limited commitment to demonstrate that second-best coordination improvements can be achieved with low to moderate risks of participants leaving the agreement. In the absence of an impartial market operator who can observe fluctuations in connected power systems, establishing quasi-markets for trading excess electricity through the kind of mechanism described here helps achieve sustainable cooperation in mutually beneficial electricity sharing.

Bibliographic Details

Main Authors:	Nikandrova, Arina, Steinbuks, Jevgenijs
Language:	English en_US
Published:	World Bank, Washington, DC 2014-06
Subjects:	ADVERSE SELECTION, AGGREGATE SUPPLY, APPROACH, ASYMMETRIC INFORMATION, AVAILABILITY, BALANCE, BARTER, COAL, CONSUMPTION OF ELECTRICITY, CONTRACT ENFORCEMENT, CONTRACTUAL AGREEMENTS, DEMAND FOR ELECTRICITY, DEREGULATION, DISCOUNT RATE, ECONOMIC BEHAVIOR, ECONOMIC BENEFITS, ECONOMIC DEVELOPMENT, ECONOMIES OF SCALE, EFFICIENT ALLOCATION, EFFICIENT ALLOCATIONS, ELECTRIC GRID, ELECTRIC POWER, ELECTRIC POWER GENERATION, ELECTRIC POWER SYSTEMS, ELECTRIC SYSTEM, ELECTRIC SYSTEMS, ELECTRICITY, ELECTRICITY CONSUMPTION, ELECTRICITY EXCHANGE, ELECTRICITY GENERATION, ELECTRICITY GENERATION CAPACITY, ELECTRICITY MARKET, ELECTRICITY PRODUCTION, ELECTRICITY SECTOR, ELECTRICITY SUPPLY, ELECTRICITY SYSTEMS, ELECTRICITY TRADE, ELECTRIFICATION, ENERGY DEMAND, ENERGY ECONOMICS, ENERGY MARKETS, ENERGY POLICY, ENERGY REGULATORY COMMISSION, ENERGY SECTOR, ENERGY TRANSMISSION, EXCESS ELECTRICITY, FIRST ORDER CONDITION, FIXED COSTS, FOSSIL, FOSSIL FUEL, GENERATION, GENERATION ASSETS, GENERATION CAPACITY, GENERATION OF ELECTRICITY, GENERATORS, GRIDS, INFRASTRUCTURE SERVICES, MARGINAL COSTS, MARKET DISTORTIONS, MICROECONOMICS, NUCLEAR POWER, NUCLEAR POWER PLANTS, OPEN ACCESS, PEAK DEMAND, PEAK DEMAND PERIODS, POLITICAL ECONOMY, POSITIVE PRODUCTION, POWER, POWER FLOWS, POWER MARKETS, POWER PLANT, POWER PLANTS, POWER POOLS, POWER SECTOR, POWER SECTOR REFORM, POWER SHORTAGES, POWER SUPPLIES, POWER SUPPLY, POWER SYSTEM, POWER SYSTEMS, PRESENT VALUE, PRICE ADJUSTMENTS, PRODUCTION OF ELECTRICITY, PRODUCTIVITY, PUBLIC SECTOR, RENEWABLE GENERATION, RETAIL ELECTRICITY, RISK SHARING, SOCIAL SURPLUS, SUNK COSTS, SUPPLY OF ELECTRICITY, TRANSMISSION CAPACITY, TRANSMISSION CONSTRAINTS, TRANSMISSION GRID, TRANSMISSION LINES, TRANSMISSION ORGANIZATION, TRANSMISSION SYSTEM, UTILITIES, WIND,
Online Access:	http://documents.worldbank.org/curated/en/2014/06/19747558/contracting-second-best-dysfunctional-electricity-markets https://hdl.handle.net/10986/19369
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