Composition of Electricity Generation Portfolios, Pivotal Dynamics and Market Prices

25 Pages Posted: 24 Apr 2008

See all articles by Albert Banal-Estañol

Albert Banal-Estañol

Universitat Pompeu Fabra - Department of Economics and Business (DEB); City University London - Department of Economics

Augusto Rupérez Micola

Universitat Pompeu Fabra

Date Written: November 21, 2007

Abstract

We use a simulation model to study how the diversification of electricity generation portfolios influences wholesale prices. We find that technological diversification generally leads to lower market prices but that the relationship is mediated by the supply to demand ratio. In each demand case there is a threshold where pivotal dynamics change. Pivotal dynamics pre- and post-threshold are the cause of non-linearities in the influence of diversification on market prices. The findings are robust to our choice of behavioural parameters and match close-form solutions where those are available.

Keywords: Electricity, market power, simulations, technology diversification

Suggested Citation

Banal Estañol, Albert and Rupérez Micola, Augusto, Composition of Electricity Generation Portfolios, Pivotal Dynamics and Market Prices (November 21, 2007). Available at SSRN: https://ssrn.com/abstract=1124825 or http://dx.doi.org/10.2139/ssrn.1124825

Albert Banal Estañol

Universitat Pompeu Fabra - Department of Economics and Business (DEB) ( email )

Barcelona, 08005
Spain

City University London - Department of Economics ( email )

Northampton Square
London, EC1V 0HB
United Kingdom

Augusto Rupérez Micola (Contact Author)

Universitat Pompeu Fabra ( email )

Ramon Trias Fargas 25-27
Barcelona, 08005
Spain

HOME PAGE: http://www.ruperezmicola.net

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