Designing regulatory contracts for the operators of power transmission networks has become a critical policy issue in the United States. In this paper, a regulatory contract is proposed that induces network operators to optimally expand the grid, which is crucial for the emergence of efficient wholesale power markets, while also satisfying the other traditional regulatory objectives. The proposed mechanism is readily implementable, since it builds on a contract currently in place in England and Wales.
The advent of "smart meters" will make possible Real Time Pricing of electricity: customers will face and react to wholesale spot prices, thus consumption of electric power will be aligned with its opportunity cost. This article determines the marginal value of a fraction of demand (or a consumer) switching to Real Time Pricing. First, it derives this marginal value for a simple yet realistic speci…cation of demand. Second, using data from the French power market, it estimates that, for the vast majority of residential customers whose peak demand is lower than 6 kV A, the net surplus from switching to Real Time Pricing is lower than 1 e/year for low demand elasticity, 4 e/year for high demand elasticity. This …nding casts a doubt on the economic value of rolling out smart meters to all residential customers, for both policy makers and power suppliers.
The advent of "smart meters" will make possible Real Time Pricing of electricity: customers will face and react to wholesale spot prices, thus consumption of electric power will be aligned with its opportunity cost. This article determines the marginal value of a fraction of demand (or a consumer) switching to Real Time Pricing. First, it derives this marginal value for a simple yet realistic speci…cation of demand. Second, using data from the French power market, it estimates that, for the vast majority of residential customers whose peak demand is lower than 6 kV A, the net surplus from switching to Real Time Pricing is lower than 1 e/year for low demand elasticity, 4 e/year for high demand elasticity. This …nding casts a doubt on the economic value of rolling out smart meters to all residential customers, for both policy makers and power suppliers.
Thanks to "smart grids", consumers will gradually become active players in electricity markets, especially by voluntarily decreasing their consumption when receiving scarcity messages from the market operator. For a fast and efficient transition to a more dynamic industry, the regulatory and pricing scheme used both for the endowment of consumers with curtailment rights and the exercise of the options must decentralize the socially optimal dispatching. In particular, the options must be acquired at the retail price. This price is to be an income for the suppliers of energy who have defaulted or who have been withdrawn from the initial dispatch. When exercised, the options of load shedding are to be rewarded at the wholesale price paid by defaulting producers. The volume of the options must be allocated to each consumer taking into account his ability to manipulate information on his profile of consumption and his ability to modify the profile.
International audienceThis article examines the participation of consumers in adjustmentmarkets for electricity power. These markets allow market participantsto respond to random supply shocks occurring after quantities havebeen contracted. Under perfect competition, opening the adjustmentmarket to consumers always increase ex post efficiency, hence welfare,as expected. However, this result is not robust to strategic behavior byconsumers who hold private information on their value for electricitypower. We prove that under such information asymmetry, allowingconsumers to enter the adjustment market may reduce welfare. Thisarises because suppliers limit the information rents they must abandonby proposing inefficient ex ante retail contracts. If the value of expost efficiency gains due to consumers’ participation is low, whereasthe information distortion is high, the overall net effect is a welfaredecrease
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