Towards a competitive market for electricity and consumer choice in the Indian power sector

The initial phase of reforms in the Indian power sector was primarily aimed at bringing regulatory reforms and unbundling of the vertically integrated State Electricity Boards (SEBs). Enactment of the Electricity Act 2003 led to deepening of the reform process by dismantling this monopoly in the power sector. Primary issues emerging on account of transition from a single-buyer model to a multi-buyer multi-seller model include, among others, policy and regulatory initiatives related to open access, power exchanges, and transmission allocation and its pricing. The paper provides an overview of the status of competition in various segments of the power sector. It also reviews the phased program for open access outlined by various State Electricity Regulatory Commissions, including their status and impact on competition. The paper highlights a number of residual issues for the wholesale and retail competition, and also discusses the approach to address the same. These include liberalization of fuel markets, market monitoring, unbundling of retail tariffs, universal service obligation, supplier of last resort and demand response.     

The impact of liberalisation of the electricity market on the hard coal mining sector in Poland

The liberalisation of the electricity market changed the conditions of operation not only for the power industry, but also for related sectors. One of the particularly sensitive industries in Poland is coal mining, which is the result of coal-based structure of electricity generation. As it is more difficult, in the liberalised market, to burden consumers with all the costs, electricity producers are eager to transfer the risk of operation to the suppliers. That increases uncertainty about the future of the hard coal industry. The aim of this paper was to quantitatively estimate the impact that liberalisation of the electricity markets may have on the coal mining sector in Poland. First of all, the possible areas of that impact were identified. Then the model, which involved detailed relations in the impact areas identified, was developed and employed to evaluate the performance of the mining sector. The comparison of scenarios of a monopolistic electricity sector with a liberalised one enabled an estimation of the scale of the impact on the mining sector to be made. The results showed that liberalisation causes decreased coal consumption and decreased operating profits in coal companies. However, some savings in electricity costs are possible for coal producers.     

Analysis of the market penetration of clean coal technologies and its impacts in China's electricity sector

This paper discusses policy instruments for promoting the market penetration of clean coal technologies (CCTs) into China's electricity sector and the evaluation of corresponding effects. Based on the reality that coal will remain the predominant fuel to generate electricity and conventional pulverized coal boiler power plants have serious impacts on environment degradation, development of clean coal technologies could be one alternative to meet China's fast growing demand of electricity as well as protect the already fragile environment. A multi-period market equilibrium model is applied and an electricity model of China is established to forecast changes in the electricity system up to 2030s. Three policy instruments: SO₂ emission charge, CO₂ emission charge and implementing subsidies are considered in this research. The results show that all instruments cause a significant shift in China's electricity structure, promote CCTs’ competitiveness and lead China to gain great benefit in both resource saving and environment improvement. Since resource security and environment degradation are becoming primary concerns in China, policies that could help to gain generations’ market share of advanced coal-based technologies such as CCTs’ is suitable for the current situation of China's electricity sector.     

Barriers to the implementation of response options aimed at mitigating the impact of wind power on electricity systems

Increasing shares of renewable energy in transmission and distribution grids are significantly changing the way electricity systems must function. While these technologies offer great opportunities to fight climate change and reduce Europe's dependency on foreign energy sources, their successful integration poses significant challenges. This article identifies and discusses a set of barriers that have been identified by market parties, European institutions and partners in the European project RESPOND. According to the research findings, main barriers to be overcome include the lack of incentives for generation from some technologies to be installed and participate in markets (both renewable and required conventional generation acting as a back‐up), lack of participation of renewables in ancillary services markets, lack of conventional generation and demand providing flexibility to the system, difficulty to carry out required reinforcements to the transmission grid both at local and at regional level, inefficiency of existing network congestion management schemes, as well as well‐designed transmission and distribution network charges and lack of incentives for distribution system operators to implement Active Network Management practices in the operation and planning of their networks. Copyright © 2010 John Wiley & Sons, Ltd.     

On the evaluation of market power and market dominance—The Nordic electricity market

This paper studies different concentration and dominance measures using structural indexes used to initially screen the competitive situation in a market. The Nordic and Swedish electricity markets are used as the empirical cases. Market concentration issues in the Nordic electricity market in general and in Sweden in particular have been, at least in initial screenings, approached by the Herfindahl–Hirschman Index (HHI). This article uses an alternative measure to HHI, which is based on market shares of the two largest firms in the market. The results shows that only the Swedish wholesale market has a firm that can be regarded as dominant, but only during very short periods. The results from a hypothetical merger between the second and third largest company in the Swedish wholesale market shows that when the dominant position of the largest firm is reduced, by increasing the size of the second largest firm, the threshold value indicates that competition actually will increase (contradicting to the HHI).     

Market power analysis for the Iranian electricity market

The market power problem in Iranian electricity market is addressed in this study. This paper by using various structural indices of market power and reviewing market results analyzes the intensity of competition in Iran’s electricity market and examines whether this market is functioning at an appropriate level of efficiency. In this article the most well-known indices of market power are calculated in two approaches for two different scenarios (current situation and future outlook of generation sector’s ownership in Iran’s power industry). Comparing the results of these scenarios promises more competitive market for the second scenario. Calculating Residual Supply Index for Iran’s power market shows despite admissible values of concentration ratios, due to supply scarcity during periods when the demand is close to the total available capacity, some suppliers can exercise market power even with a relatively small market share. The most important price and load indices like weighted average prices and load/price duration curves of Iranian electricity market during March 2007–March 2008 are also analyzed in this paper. These results imply the existence of economic withholding. The main limiting factors of competition and significant implemented countermeasures for market power mitigation in Iran’s electricity market are also mentioned.     

Capturing the impact of shocks on the electricity sector performance in the OECD

This paper focuses on the responses of electricity performance to shocks arising from structural reform policies. With a dynamic panel vector autoregression (pVAR) model that allows endogeneity, we decompose the responses of electricity performance measures to shocks generated by the inclusion of structural reform indicators capturing the effect of competition, regulation and privatization. The sample spans the period from 1975 to 2011 including 30 OECD countries. The empirical findings do confirm that a robust independent regulatory scheme must be implemented in order to achieve a competitive electricity market. Finally the dynamic pVAR results using impulse response functions and variance decomposition analysis further support the validity of these results.     

Impact of FACTS devices on exercising market power in deregulated electricity market

In power system studies, congestion in transmission lines and utilization of flexible alternating current transmission system (FACTS) devices are closely associated. These devices are very important due to their role in power delivery system enhancement. It is to be noted that the generation companies can exercise their market power which depends on the line flows, line constraints, generators’ location and its share to the individual loads. This issue cannot be overlooked as it creates monopoliness which is against the deregulated market policy. The objective of this paper is to study the impact of market power when FACTS devices like thyristor controlled switching capacitor (TCSC) and thyristor controlled phase angle regulator (TCPAR) are used under steady state operation. The market power is determined using nodal must-run share (NMRS) index for the standard IEEE 14-bus system with and without the above FACTS devices and the results obtained are compared. All the above simulations are conducted in a MATLAB 7.9-R2009b environment.     

Analysis of competition and market power in the wholesale electricity market in India

The electricity reforms were initiated in India with the objective of promoting competition in the electricity market. In order to promote competition, the Electricity Act 2003 was enacted and various policy initiatives were taken by the Government of India. Central Electricity Regulatory Commission (CERC) also facilitated competition through the regulatory framework of availability based tariff, Indian Electricity Grid Code, open access in inter-state transmission, inter-state trading and power exchanges. Despite these initiatives, electricity prices increased in the Wholesale Electricity Market in India (WEMI). This paper analyses the market structure and competitiveness in the WEMI. There are, of course, various potential reasons for the rise in the electricity price. This paper seeks to investigate, if market power was one of the reasons for increase in market prices. Concentration ratio, Herfindahl–Hirschman index, Supply Margin Assessment, and Residual Supply Index have been used to measure market power. This paper also uses the price–cost mark-up to examine, if exercise of market power led to higher margins. The analysis suggests that market power of firms may be part of the reason for the increase in electricity prices in WEMI. The study suggests various measures to increase competition in the WEMI.     

An impact assessment of electricity and emission allowances pricing in optimised expansion planning of power sector portfolios

The present work concerns a systematic investigation of power sector portfolios through discrete scenarios of electricity and CO₂ allowance prices. The analysis is performed for different prices, from regulated to completely deregulated markets, thus representing different electricity market policies. The modelling approach is based on a stochastic programming algorithm without recourse, used for the optimisation of power sector economics under multiple uncertainties. A sequential quadratic programming routine is applied for the entire investigation period whilst the time-dependent objective function is subject to various social and production constraints, usually confronted in power sectors. The analysis indicated the optimal capacity additions that should be annually ordered from each competitive technology in order to substantially improve both the economy and the sustainability of the system. It is confirmed that higher electricity prices lead to higher financial yields of power production, irrespective of the CO₂ allowance price level. Moreover, by following the proposed licensing planning, a medium-term reduction of CO₂ emissions per MW h by 30% might be possible. Interestingly, the combination of electricity prices subsidisation with high CO₂ allowance prices may provide favourable conditions for investors willing to engage on renewable energy markets.     

The impact of wind power on electricity prices

This paper investigates the impact of wind power on electricity prices using a production cost model of the Independent System Operator – New England power system. Different scenarios in terms of wind penetration, wind forecasts, and wind curtailment are modeled in order to analyze the impact of wind power on electricity prices for different wind penetration levels and for different levels of wind power visibility and controllability. The analysis concludes that electricity price volatility increases even as electricity prices decrease with increasing wind penetration levels. The impact of wind power on price volatility is larger in the shorter term (5-min compared to hour-to-hour). The results presented show that over-forecasting wind power increases electricity prices while under-forecasting wind power reduces them. The modeling results also show that controlling wind power by allowing curtailment increases electricity prices, and for higher wind penetrations it also reduces their volatility.     

Price formation and market power in the German wholesale electricity market in 2006

From 2002 to 2006, German wholesale electricity prices more than doubled. The purpose of this paper is to estimate the price components in 2006 in order to identify the factors responsible for the increase. We develop a competitive benchmark model, taking into account power plant characteristics, fuel and CO₂-allowance prices, wind generation, cross-border flows, unit commitment, and startup conditions, to estimate the difference between generation costs and observed market prices for every hour in 2006. We find that prices at the German wholesale market (European Energy Exchange—EEX) are above competitive levels for a large fraction of the observations. We verify the robustness of the results by carrying out sensitivity analyses. We also address the issue of revenue adequacy.     

Germany's nuclear power plant closures and the integration of electricity markets in Europe

This paper examines the potential implications of national policies that lead to a sudden increase of wind power in the electricity mix for interconnected European electricity markets. More specifically, it examines market integration before and after the closures of eight nuclear power plants that occurred within a period of a few months in Germany during 2011. The short- and- long run interrelationships of daily electricity spot prices, from November 2009 to October 2012, in: APX-ENDEX, BELPEX, EPEX-DE, EPEX-FR, NORDPOOL, OMEL and SWISSIX; and wind power in the German system are analysed. Two MGARCH (Multivariate Generalized Autoregressive Conditional Heteroscedasticity) models with dynamic correlations are used to assess spot market behaviour in the short run, and a fractional cointegration analysis is conducted to investigate changes in the long-run behaviour of electricity spot prices. Results show: positive time-varying correlations between spot prices in markets with substantial shared interconnector capacity; a negative association between wind power penetration in Germany and electricity spot prices in the German and neighbouring markets; and, for most markets, a decreasing speed in mean reversion.     

The potential for segmentation of the retail market for electricity in Ireland

We estimate the gross margin that is earned from the supply of electricity to households in Ireland. Using half hourly electricity demand data, the system marginal price (also called the wholesale price) and the retail price of electricity, we analyse how the gross margin varies across customers with different characteristics. The wholesale price varies throughout the day, thus, the time at which electricity is used affects the gross margin. The main factor in determining gross margin, however, is the level of demand.The highest gross margins are earned from supplying customers that have the following characteristics: being aged between 46 and 55, having a household income of at least €75,000 per annum, being self-employed, having a third-level education, having a professional or managerial occupation, living in a household with seven or more people, living in a detached house, having at least five bedrooms or being a mortgage holder.An OLS regression shows that gross margin is partly explained by the energy conservation measures which are present in a household; the number of household members; the number of bedrooms; age; occupation; and accommodation-type.     

The impact of climate change on the electricity market: A review

Climate change will impact electricity markets through both electricity demand and supply. This paper reviews the research on this topic. Whereas there is much that remains unknown or uncertain, research over the last few years has significantly advanced our knowledge. In general, higher temperatures are expected to raise electricity demand for cooling, decrease demand for heating, and to reduce electricity production from thermal power plants. The effect of climate change on the supply of electricity from non-thermal sources shows great geographical variability due to differences in expected changes to temperature and precipitation. Whereas the research frontier has advanced significantly in the last few years, there still remains a significant need for more research in order to better understand the effects of climate change on the electricity market. Four significant gaps in the current research are regional studies of demand side impacts for Africa, Asia, the Caribbean and Latin America, the effects of extreme weather events on electricity generation, transmission and demand, changes to the adoption rate of air conditioning, and finally, our understanding of the sensitivity of thermal power supply to changes in air and water temperatures.     

Input-output table of electricity demand and its application

It is very important for electric utility to determine dominant sectors which have more impacts on electricity consumption in national economy system. In this paper, an input-output perspective and methodology is proposed to handle this issue. The input-output table of electricity demand (IOTED) is put forward based on the input-output table of national economy (IOTNE). The relevancy of electricity demand in various sectors is revealed by means of electricity consumption chains (ECCs), which are key components in the IOTED. Besides, a new concept, electricity demand multiplier (EDM), is presented to identify dominant sectors imposing great impacts on electricity demand quantitatively. In order to testify the effectiveness of the proposed methodology, a case based on provincial economy system in China is studied. Dominant sectors are identified and discussed.     

Integration of wind power in the liberalized Dutch electricity market

Wind power is becoming a large‐scale electricity generation technology in a number of European countries, including the Netherlands. Owing to the variability and unpredictability of wind power production, large‐scale wind power can be foreseen to have large consequences for balancing generation and demand in power systems. As an essential aspect of the Dutch market design, participants are encouraged to act according to their energy programs, as submitted day‐ahead to the system operator. This program responsibility shifts the burden of balancing wind power away from the system operator to the market. However, the system operator remains the responsible party for balancing any generation/load imbalances that may still be arising in real time. In this article, features that are unique for the Dutch market design are presented and their implications on the system integration of wind power are investigated. It is shown that the Dutch market design penalizes the intermittent nature of wind power. A discussion of opportunities and threats of balancing wind power by use of market forces is provided. Last, an outline is given of future work. Copyright © 2006 John Wiley &Sons, Ltd.     

High penetration wind generation impacts on spot prices in the Australian national electricity market

This paper explores wind power integration issues for the South Australian (SA) region of the Australian National Electricity Market (NEM) by assessing the interaction of regional wind generation, electricity demand and spot prices over 2 recent years of market operation. SA's wind energy penetration has recently surpassed 20% and it has only a limited interconnection with other regions of the NEM. As such, it represents an interesting example of high wind penetration in a gross wholesale pool market electricity industry. Our findings suggest that while electricity demand continues to have the greatest influence on spot prices in SA, wind generation levels have become a significant secondary influence, and there is an inverse relationship between wind generation and price. No clear relationship between wind generation and demand has been identified although some periods of extremely high demand may coincide with lower wind generation. Periods of high wind output are associated with generally lower market prices, and also appear to contribute to extreme negative price events. The results highlight the importance of electricity market and renewable policy design in facilitating economically efficient high wind penetrations.