Optimal electricity imbalance pricing for the emerging penetration of renewable and low-cost generators

Detalhes bibliográficos
Autor(a) principal: Ghiassi, Yashar
Data de Publicação: 2023
Outros Autores: Belo, Rodrigo, Reza, Mohammed, Bunn, Derek
Tipo de documento: Artigo
Idioma: eng
Título da fonte: Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos)
Texto Completo: http://hdl.handle.net/10362/159491
Resumo: Funding: Rodrigo Belo acknowledges funding by Fundação para a Ciência e a Tecnologia (UIDB/00124/2020, UIDP/00124/2020 and Social Sciences DataLab – PINFRA/22209/2016), POR Lisboa, and POR Norte (Social Sciences DataLab, PINFRA/22209/2016).
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spelling Optimal electricity imbalance pricing for the emerging penetration of renewable and low-cost generatorsenergy-related operationsenvironmental operationsSDG 7 - Affordable and Clean EnergyFunding: Rodrigo Belo acknowledges funding by Fundação para a Ciência e a Tecnologia (UIDB/00124/2020, UIDP/00124/2020 and Social Sciences DataLab – PINFRA/22209/2016), POR Lisboa, and POR Norte (Social Sciences DataLab, PINFRA/22209/2016).Problem definition: With the rise of renewables and the decline of fossil fuels, electricity markets are shifting toward a capacity mix in which low-cost generators (LCGs) are dominant. Within this transition, policymakers have been considering whether current market designs are still fundamentally fit for purpose. This research analyses a key aspect: the design of real-time imbalance pricing mechanisms. Currently, markets mostly use either single pricing or dual pricing as their imbalance pricing mechanisms. Single-pricing mechanisms apply identical prices for buying and selling, whereas dual-pricing mechanisms use different prices. The recent harmonization initiative in Europe sets single pricing as the default and dual pricing as the exception. This leaves open the question of when dual pricing is advantageous. We compare the economic efficiency of two dual-pricing mechanisms in current practice with that of a single-pricing design and identify conditions under which dual pricing can be beneficial. We also prove the existence of an optimal pricing mechanism. Methodology/results: We first analytically compare the economic efficiency of single-pricing and dual-pricing mechanisms. Furthermore, we formulate an optimal pricing mechanism that can deter the potential exercise of market power by LCGs. Our analytical results characterize the conditions under which a dual pricing is advantageous over a single pricing. We further compare the economic efficiency of these mechanisms with respect to our proposed optimal mechanism through simulations. We show that the proposed pricing mechanism would be the most efficient in comparison with others and discuss its practicability. Managerial implications: Our analytical comparison reveals market conditions under which each pricing mechanism is a better fit and whether there is a need for a redesign. In particular, our results suggest that existing pricing mechanisms are adequate at low/moderate market shares of LCGs but not for the high levels currently envisaged by policymakers in the transition to decarbonization, where the optimal pricing mechanism will become more attractive.NOVA School of Business and Economics (NOVA SBE)RUNGhiassi, YasharBelo, RodrigoReza, MohammedBunn, Derek2023-11-02T22:08:50Z2023-092023-09-01T00:00:00Zinfo:eu-repo/semantics/publishedVersioninfo:eu-repo/semantics/articleapplication/pdfhttp://hdl.handle.net/10362/159491engPURE: 60627545https://doi.org/10.1287/msom.2021.0555info:eu-repo/semantics/openAccessreponame:Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos)instname:Agência para a Sociedade do Conhecimento (UMIC) - FCT - Sociedade da Informaçãoinstacron:RCAAP2024-03-11T05:41:53Zoai:run.unl.pt:10362/159491Portal AgregadorONGhttps://www.rcaap.pt/oai/openaireopendoar:71602024-03-20T03:57:34.052011Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos) - Agência para a Sociedade do Conhecimento (UMIC) - FCT - Sociedade da Informaçãofalse
dc.title.none.fl_str_mv Optimal electricity imbalance pricing for the emerging penetration of renewable and low-cost generators
title Optimal electricity imbalance pricing for the emerging penetration of renewable and low-cost generators
spellingShingle Optimal electricity imbalance pricing for the emerging penetration of renewable and low-cost generators
Ghiassi, Yashar
energy-related operations
environmental operations
SDG 7 - Affordable and Clean Energy
title_short Optimal electricity imbalance pricing for the emerging penetration of renewable and low-cost generators
title_full Optimal electricity imbalance pricing for the emerging penetration of renewable and low-cost generators
title_fullStr Optimal electricity imbalance pricing for the emerging penetration of renewable and low-cost generators
title_full_unstemmed Optimal electricity imbalance pricing for the emerging penetration of renewable and low-cost generators
title_sort Optimal electricity imbalance pricing for the emerging penetration of renewable and low-cost generators
author Ghiassi, Yashar
author_facet Ghiassi, Yashar
Belo, Rodrigo
Reza, Mohammed
Bunn, Derek
author_role author
author2 Belo, Rodrigo
Reza, Mohammed
Bunn, Derek
author2_role author
author
author
dc.contributor.none.fl_str_mv NOVA School of Business and Economics (NOVA SBE)
RUN
dc.contributor.author.fl_str_mv Ghiassi, Yashar
Belo, Rodrigo
Reza, Mohammed
Bunn, Derek
dc.subject.por.fl_str_mv energy-related operations
environmental operations
SDG 7 - Affordable and Clean Energy
topic energy-related operations
environmental operations
SDG 7 - Affordable and Clean Energy
description Funding: Rodrigo Belo acknowledges funding by Fundação para a Ciência e a Tecnologia (UIDB/00124/2020, UIDP/00124/2020 and Social Sciences DataLab – PINFRA/22209/2016), POR Lisboa, and POR Norte (Social Sciences DataLab, PINFRA/22209/2016).
publishDate 2023
dc.date.none.fl_str_mv 2023-11-02T22:08:50Z
2023-09
2023-09-01T00:00:00Z
dc.type.status.fl_str_mv info:eu-repo/semantics/publishedVersion
dc.type.driver.fl_str_mv info:eu-repo/semantics/article
format article
status_str publishedVersion
dc.identifier.uri.fl_str_mv http://hdl.handle.net/10362/159491
url http://hdl.handle.net/10362/159491
dc.language.iso.fl_str_mv eng
language eng
dc.relation.none.fl_str_mv PURE: 60627545
https://doi.org/10.1287/msom.2021.0555
dc.rights.driver.fl_str_mv info:eu-repo/semantics/openAccess
eu_rights_str_mv openAccess
dc.format.none.fl_str_mv application/pdf
dc.source.none.fl_str_mv reponame:Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos)
instname:Agência para a Sociedade do Conhecimento (UMIC) - FCT - Sociedade da Informação
instacron:RCAAP
instname_str Agência para a Sociedade do Conhecimento (UMIC) - FCT - Sociedade da Informação
instacron_str RCAAP
institution RCAAP
reponame_str Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos)
collection Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos)
repository.name.fl_str_mv Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos) - Agência para a Sociedade do Conhecimento (UMIC) - FCT - Sociedade da Informação
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