Competition in the Italian electricity market: The unforeseen social welfare losses of reform

2021 ◽  
pp. 75-91
Author(s):  
Maria Chiara D’Errico
Keyword(s):  
Market Power ◽  
Electricity Markets ◽  
Electricity Market ◽  
Competitive Equilibrium ◽  
Supply And Demand ◽  
Empirical Literature ◽  
Open Market ◽  
Power Sector ◽  
Market Prices ◽  
Welfare Losses

The worldwide wave of reforms investing power industry has created new challenges to both supply demand side management. After deregulation, electric utilities restructured their opera-tions from vertically integrated mechanisms to open market systems in order to establish a new competitive sector. Reform has involved also the Italian power sector, but competition, as lar-gely shown by the empirical literature particularly in the first years of reform, has been far to be reached, and the electricity markets has been characterized by conditions of oligopoly and exercise of market power. This paper aims to analyze welfare loss and deviation from the competitive equilibrium recorded in the day ahead Italian electricity market after the first wave of reforms was almost implemented. The study presents a theoretical and empirical model to construct a competitive equilibrium, estimating market power, both, on the supply and demand sides of the day ahead electricity market. Results show the effect of non-competitive equilibriums for the hourly markets in the period 2013-2014. In an ideal competitive market, prices would be lower than historical prices by about 2-5% and quantities would be higher by about 0.5-1%.

scholarly journals Research on Funding Differences among Regional Electricity Markets in Northern China based on Thermoelectric Decoupling

2020 ◽  
Vol 185 ◽  
pp. 01017
Author(s):  
Sen Wang ◽  
Can Sun ◽  
Zhiyong Gan ◽  
Liansheng Zhou ◽  
Guilin Wang ◽  
...  
Keyword(s):  
Market Power ◽  
Electricity Markets ◽  
Electricity Market ◽  
Supply And Demand ◽  
Market Price ◽  
Northern China ◽  
Spot Market ◽  
Market Mechanism ◽  
Large Influence ◽  
Electricity Spot Market

With the development of China’s electricity spot market, planned power and market power will coexist for a long time. At the same time, by avoiding the risk of market price fluctuation through medium and long-term market, spot market guarantees electricity balance and secure operation of the grid. The electricity market mechanism has an increasingly large influence on the operation and dispatching model of power system. In spot market, decoupling operation model of market and non-market power has a large influence on both supply and demand sides and improper dredging mechanism may cause significant settlement deviation. To solve this problem, the paper, taking a city in northern China as an example, analyzes the electricity spot market, compares the sources of difference fund of market and non-market power under decoupling and non-decoupling models and compares the pros and cons of coupling and decoupling. The paper also studies the disparity of difference fund and proposes advice adapted to the electricity spot market development of northern China.

scholarly journals Competition in Power Generation: Ex-ante Analysis of Indonesia’s Electricity Market

Energies ◽  
2020 ◽  
Vol 13 (24) ◽  
pp. 6741
Author(s):  
Dzikri Firmansyah Hakam ◽  
Sudarso Kaderi Wiyono ◽  
Nanang Hariyanto
Keyword(s):  
Power System ◽  
Market Structure ◽  
Market Power ◽  
Electricity Markets ◽  
Electricity Market ◽  
Regulatory Reform ◽  
Optimal Number ◽  
Load Flow ◽  
Utility Company ◽  
Competitive Electricity Markets

This research optimises the mix and structure of Generation Companies (GenCos) in the Sumatra power system, Indonesia. Market power, indicating the ability to raise prices profitably above the competitive level, tends to be a significant problem in the aftermath of electricity market restructuring. In the process of regulatory reform and the development of competitive electricity markets, it is desirable and practical to establish an efficient number of competitor GenCos. Simulations of a power system account for multi-plant mergers of GenCos subject to a regulatory measure of the Residual Supply Index and the influence of direct current load flow and the topology of the system. This study simulates the Sumatra power system in order to determine the following: optimal market structure, efficient GenCo generation mix, and the optimal number of competitive GenCos. Further, this study seeks to empirically optimise the electricity generation mix and electricity market structure of the Sumatra power system using DC load flow optimisation, market power index, and multi-plant monopoly analysis. The simulations include generation and transmission constraints to represent network constraints. This research is the first to analyse the Sumatra power system using imperfect (Cournot) competition modelling. Furthermore, this study is the first kind to optimise the mix and structure of the Sumatra generation power market. The guidelines and methodology in this research can be implemented in other countries characterised by a monopoly electricity utility company.

International Perspectives on Electricity Market Monitoring and Market Power Mitigation

2007 ◽  
Vol 6 (3) ◽  
Author(s):  
José A. García ◽  
James D. Reitzes
Keyword(s):  
Market Power ◽  
Electricity Markets ◽  
Electricity Market ◽  
Information Disclosure ◽  
Design Features ◽  
Disclosure Requirements ◽  
Market Monitoring ◽  
International Perspectives ◽  
Ex Post ◽  
Bilateral Trading

We review the different market monitoring and market-power mitigation policies that arise in world electricity markets. Regulators for electricity markets apparently respond to differences in underlying market structure and design features when choosing between ex-ante (that is, rule-based) behavioral restrictions as opposed to ex-post enforcement (that is, investigations and sanctions) as the principal means for deterring abuses of market power. Particular design features that influence market-monitoring policies are whether the market is one-part (energy only) versus two-part (energy and capacity), and whether there is centralized or bilateral trading. Information-disclosure requirements also are a key element of market monitoring.

scholarly journals Pricing decisions in peer-to-peer and prosumer-centred electricity markets: Experimental analysis in Germany and the United Kingdom

2021 ◽  
Author(s):  
Ulf J.J. Hahnel ◽  
Michael James Fell
Keyword(s):  
United Kingdom ◽  
Citizen Participation ◽  
Electricity Markets ◽  
Electricity Market ◽  
Supply And Demand ◽  
Energy Transition ◽  
Active Participation ◽  
Peer To Peer ◽  
Political Orientation ◽  
The United Kingdom

Prosumer-centred electricity market models such as peer-to-peer communities can enable optimized supply and demand of locally generated electricity as well as an active participation of citizens in the energy transition. An important element of active participation is the improved ability of community members to identify and choose who they transact with in a much more granular way than is usual. Despite this key novelty and the social core of prosumer-centred markets, little is known about how citizens would trade with different actors involved in the system. Here, we report a preregistered cross-national experiment in which we investigated individual trading preferences in a peer-to-peer community, including a variety of private and non-private trading actors. Our data from the United Kingdom (n=441) and Germany (n=440) shows that set buying and selling prices strongly vary, pointing to three systematically different trading strategies that individuals apply as a function of involved trading actor. Findings moreover reveal that trading decisions are determined by individuals’ political orientation, place attachment, and climate change beliefs as well as individual differences in trust in the involved trading actor. Finally, our results illustrate high consistency in trading preferences across nations. However, nation-level differences emerged when decisions were made publicly visible, emphasising the need to consider context-effects in peer-to-peer system design. Our results have implications for the development of prosumer-centred energy models and the design of interventions to increase citizen participation across national contexts.

scholarly journals A New Model to Simulate Local Market Power in a Multi-Area Electricity Market: Application to the European Case

Energies ◽  
2019 ◽  
Vol 12 (11) ◽  
pp. 2068 ◽  
Author(s):  
Alberto Orgaz ◽  
Antonio Bello ◽  
Javier Reneses
Keyword(s):  
Power Systems ◽  
Market Power ◽  
Electricity Markets ◽  
Electricity Market ◽  
Imperfect Competition ◽  
System Analysis ◽  
Original Method ◽  
Local Market ◽  
The Status ◽  
New Policies

The work presented in this article proposes an original method that models the medium-term market equilibrium under imperfect competition circumstances in multi-area electricity systems. It provides a system analysis considering multiple market splitting possibilities, where local market power may appear according to the status of the interconnections. As a result of new policies and regulations, power systems are increasingly integrating the existing electricity markets in unified frameworks. The integration of electricity markets poses highly challenging tasks due to the uncertainty that comes from the agents’ strategic behaviors which depend on multiple factors, for instance, the state of the interconnections. When it comes to modeling these effects, the purpose is to identify each strategy by using conjectured-price responses that depend on the different states of the system. Consequently, the problem becomes highly combinatorial, which heightens its size as well as its complexity. Therefore, the purpose of this work’s methodology is the reduction of the possible network configurations so as to ensure a computational tractability in the problem. In order to validate this methodology, it has been put to the test in a realistic and full-scale two-year operation planning model of the European electricity market that consists of a group of nine countries.

scholarly journals Essays on the Interaction  Between Risk and Market  Structure in Electricity  Markets

2021 ◽  
Author(s):  
◽  
Gabriel Godofredo Fiuza de Braganca
Keyword(s):  
Market Structure ◽  
Market Power ◽  
Electricity Markets ◽  
Electricity Market ◽  
Hybrid Approach ◽  
Spot Market ◽  
Spot Price ◽  
Policy Makers ◽  
Forward Markets ◽  
Electricity Spot Market

<p>This thesis proposes a new framework to jointly analyze electricity spot market and hedging decisions in an oligopolistic setup. Firstly, we find that, when exogenous, both quantity of electricity hedged by contract and vertical integration decrease the equilibrium spot price. Secondly, we use a hybrid approach and show that market structure can affect a generator’s decision to vertically integrate under uncertain demand. Thirdly, we consider uncertainty in costs and demand and show that concentration in the spot market, for a given hedge quantum, can increase forward prices and affect the slope of the forward curve. Our empirical results indicate that the model fits the New Zealand electricity market well. This evidence that market structure and hedging decisions are closely connected is further explored in a three period equilibrium model for the spot and forward markets, where hedging occurs prior to the submission of supply curves. Taking into account demand-side and supply-side uncertainties, we find that when hedging is endogenous, hedging quantities are affected by spot market parameters, but market power is itself mitigated in the conscious hedging choice of generators. We also show that forward markets can coexist with highly vertically integrated markets. The importance of our results is general. Our models can be used by policy makers to analyze investment and forward price implications of changes in the spot market structure. Our results also indicate that electricity generators, in equilibrium, face a trade-off between market power and hedging. Given that it is socially beneficial to manage risk, the equilibrium impact of their choices on welfare should not be considered in isolation by competition authorities.</p>

scholarly journals The Process of Liberalization of Electricity Market in Albania

2015 ◽  
Vol 2 (1) ◽  
pp. 50
Author(s):  
Helga Zogolli
Keyword(s):  
Market Power ◽  
Electricity Markets ◽  
Electricity Market ◽  
Electricity Industry ◽  
Natural Monopoly ◽  
Market Forces ◽  
Power Monitoring ◽  
The Past ◽  
Long Run ◽  
Available Information

The motivation for electricity liberalization differs slightly between countries; however most of the countries share common ideological and political reasons regarding disaffection with the vertically integrated monopoly model of the past and a strong belief that the success of liberalization in other industries can be repeated for the electricity industry. The introduction of competition in the electricity industry has been justified by the perceived benefits of introducing market forces in an industry previously viewed as a natural monopoly with substantial vertical economies. Therefore the motivation behind electricity liberalization is to promote in the long run efficiency gains, to stimulate technical innovation and to lead to efficient investment.First the project is reviewing from the literature, the available information on market power monitoring in electricity markets. There are briefly explained definitions, strategies, indices and methods of mitigating market power as well as the several methods of detecting market power used from market monitors/regulators. After, the general features of the electricity industry are presented briefly as background for the analysis. The main aspects of the liberalization process of this industry and the role it has played in the creation of PX-s is described.

scholarly journals MARKET DRIVEN POWER PLANT INVESTMENT PERSPECTIVES IN EUROPE: CLIMATE POLICY AND TECHNOLOGY SCENARIOS UNTIL 2050 IN THE MODEL EMELIE-ESY

2013 ◽  
Vol 04 (supp01) ◽  
pp. 1340007 ◽  
Author(s):  
A. SCHRÖDER ◽  
T. TRABER ◽  
C. KEMFERT
Keyword(s):  
Climate Policy ◽  
Electricity Markets ◽  
Electricity Market ◽  
Carbon Capture ◽  
Nuclear Power ◽  
Carbon Capture And Storage ◽  
Market Prices ◽  
Generation Capacity ◽  
Private Investors ◽  
A Minor

In the framework of the Energy Modeling Forum 28, we investigate how climate policy regimes affect market developments under different technology availabilities on the European power markets. We use the partial equilibrium model EMELIE-ESY with focus on electricity markets in order to determine how private investors optimize their generation capacity investment and operation over the horizon 2010 to 2050. For the year 2050, the model projects a minor increase of power consumption of 10% under current climate policy, and a balanced pathway for consumption under ambitious climate policy compared to 2010 levels. These results contrast with findings of POLES and PRIMES models that predict strong consumption increases of 44% to 48% by 2050 and claim competitiveness of nuclear power and CCS options. Under ambitious climate policy, our findings correspond with major increases of wholesale electricity market prices and comparatively less pronounced emission price increases, which trigger no investments into Carbon Capture and Storage (CCS) and a strongly diminishing share of nuclear energy.

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