Has electric utility restructuring led to lower electricity prices for residential consumers in Texas?

This paper analyzes the determination of residential electricity prices in the competitive Electric Reliability Council of Texas (ERCOT) market. This analysis suggests that electricity restructuring in Texas has not yet resulted in lower prices for the majority of residential energy consumers in areas open to competition. Contrary to common expectations, residential electricity costs for consumers at a typical (1000 kWh per month) consumption level have increased at a greater rate in the areas of Texas offering retail choice than in the areas of the State where retail competition has not been introduced.     

The crucial relationship among energy commodity prices: Evidence from the Spanish electricity market

The main purpose of this article is twofold to analyze: (a) the long-term relation among the commodities prices and between spot electricity market price and commodity prices, and (b) the short-term dynamics among commodity prices and between electricity prices and commodity prices. Data between 2002 and 2005 from the Spanish electricity market was used. Econometric methods were used in the analysis of the commodity spot price, namely the vector autoregression model, the vector error correction model and the granger causality test. The co-integration approach was used to analyze the long-term relationship between the common stochastic trends of four fossil fuel prices. One of the findings in the long-term relation is that the prices of fuel and the prices of Brent are intertwined, though the prices of Brent ten to “move” to reestablish the price equilibrium. Another finding is that the price of electricity is explained by the evolution of the natural gas series.     

Characteristics of the prices of operating reserves and regulation services in competitive electricity markets

In this paper, characteristics of the prices of reserves and regulation services in the Ontario, New York and ERCOT electricity markets are studied. More specifically, price variability, price jumps, long-range correlation, and non-linearity of the prices are analyzed using the available measures in the literature. For the Ontario electricity market, the prices of 10-min spinning, 10-min non-spinning, and 30-min operating reserves for the period May 1, 2002 to December 31, 2007 are analyzed. For the New York market, prices of the same reserves plus regulation service are studied for the period February 5, 2005 to December 31, 2008. For the ERCOT market, we analyze the prices of responsive reserve, regulation up and regulation down services, for the period January 1, 2005 to December 31, 2009. The studied characteristics of operating reserve and regulation prices are also compared with those of energy prices. The findings of this paper show that the studied reserve and regulation prices feature extreme volatility, more frequent jumps and spikes, different peak price occurrence time, and lower predictability, compared to the energy prices.     

Successful renewable energy development in a competitive electricity market: A Texas case study

The development of renewable energy in markets with competition at wholesale and retail levels poses challenges not present in areas served by vertically-integrated utilities. The intermittent nature of some renewable energy resources impact reliability, operations, and market prices, in turn affecting all market participants. Meeting renewable energy goals may require coordination among many market players.     

A decision support tool for the analysis of pricing,investment and regulatory processes in a decentralized electricity market

After the liberalization of the electricity generation industry, capacity expansion decisions are made by multiple self-oriented power companies. Unlike the centralized environment, decision-making of market participants is now guided by price signal feedbacks and by an imperfect foresight of the future market conditions (and competitor actions) that they will face. In such an environment, decision makers need to better understand long-term dynamics of the supply and demand sides of the power market. In this study, a system dynamics model is developed, to better understand and analyze the decentralized and competitive electricity market dynamics in the long run. The developed simulation model oversees a 20-year planning horizon; it includes a demand module, a capacity expansion module, a power generation module, an accounting and finance module, various competitors, a regulatory body and a bidding mechanism. Many features, singularities and tools of decentralized markets, such as; capacity withholding, enforced divestment, long-term contracts, price-elastic demands, incentives/disincentives, are also incorporated into the model. Public regulators and power companies are potential users of the model, for learning and decision support in policy design and strategic planning. Results of scenario analysis are presented to illustrate potential use of the model.     

Aggregate industrial energy consumer response to wholesale prices in the restructured Texas electricity market

The aggregate response of consumers to wholesale price signals is very limited in the restructured Electric Reliability Council of Texas (ERCOT) market. An overall average own-price elasticity of demand of − 0.000008 for industrial energy consumers served at transmission voltage is estimated using a Symmetric Generalized McFadden cost function model. To date, ERCOT has sought to promote demand response to price signals without reliance on “stand alone” demand response programs, but with a market structure that is designed to facilitate economic demand response. This very limited responsiveness to wholesale price signals may prove problematic in light of policy decisions to pursue an “energy only” resource adequacy mechanism for ERCOT.     

Broken dreams: Unmet expectations of investors in the Philippine electricity restructuring and privatization

Over the last three decades, privatization and restructuring of electricity sectors has been a hot topic. The expectation was that prices would fall due to increased competition and that generators would become more innovative and efficient. However, the enthusiasm for deregulation wavered after events such as the debacle in California, the fall of Enron and the setbacks of Ontario. In the Philippines, comprehensive legislation was passed in 2001 but the implementation has been rather slow and controversial. This paper looked at the allegation of politicizing power rates and found a logical alternative to the perceived conspiracy angle. Based on market data, it is highly probable that depressed market rates was a result of coping mechanisms of new players trying to adjust to the restructured industry.     

美国加州电力市场电价的分形特征

以美国加州电力市场长期电价序列为研究对象，并由此引入了分数布朗运动模型和R／S分析法，计算出了不同时间区间内电价的赫斯特指数，发现加州电力市场符合分形市场假设，电价遵循有偏的随机游走．具有长期相关性和统计自相关性等性质。这些发现为描述市场环境下的电价分布提供了一种新模式。     

Forecasting electricity spot market prices with a k-factor GIGARCH process

In this article, we investigate conditional mean and conditional variance forecasts using a dynamic model following a k-factor GIGARCH process. Particularly, we provide the analytical expression of the conditional variance of the prediction error. We apply this method to the German electricity price market for the period August 15, 2000–December 31, 2002 and we test spot prices forecasts until one-month ahead forecast. The forecasting performance of the model is compared with a SARIMA–GARCH benchmark model using the year 2003 as the out-of-sample. The proposed model outperforms clearly the benchmark model. We conclude that the k-factor GIGARCH process is a suitable tool to forecast spot prices, using the classical RMSE criteria.     

Effects of regulatory reforms in the electricity supply industry on electricity prices in developing countries

Electric power sector reforms in the electricity supply industry have had an impact on industrial and household prices in developing countries in Latin America, the former Soviet Union, and Eastern Europe. Using original panel data for 83 countries during the period from 1985 to 2002, we examine how each policy instrument of the reform measures influenced electricity prices for countries in the above regions. We found that variables such as entry of independent power producers (IPP), unbundling of generation and transmission, establishment of a regulatory agency, and the introduction of a wholesale spot market have had a variety of impacts on electricity prices, some of which were not always consistent with expected results. The research findings suggest that neither unbundling nor introduction of a wholesale pool market on their own necessarily reduces the electric power price. In fact, contrary to expectations, there was a tendency for the price to rise. However, coexistent with an independent regulator, unbundling may work to reduce electricity prices. Privatization and the introduction of foreign IPP and retail competition lower electricity prices in some regions, but not all.     

RES support in Russia: Impact on capacity and electricity market prices

Russian renewable energy policy has undergone changes following an establishment of targets for installed capacity and power production using renewable energy sources and the introduction of new capacity based support scheme for renewable energy. The forecasted amount of future renewable power will not provide enough power production to meet growing demand for renewable energy; although, it will help with modernization of the energy sector and development of renewable technology and innovation. At the same time, the capacity support scheme for renewable energy may adversely affect capacity prices and become an additional burden for industrial consumers, who are already paying the cost of capacity support for conventional power plants, so-called Capacity Delivery Agreements (CDAs). This work assesses the impact of the new capacity based support scheme on capacity and electricity price formation. Modeling results show that the impact of capacity support for renewable energy is small compared to that of capacity support for conventional energy, suggesting that the Russian energy production mix will continue to be dominated by fossil fuel based generation.     

Renewable energy in competitive electricity markets

A restructured electricity system may undervalue renewable energy. We remain wary of unregulated markets, but urge the renewable energy community to begin considering how they could adapt to increasing customer choice.     

Did the expiration of retail price caps affect prices in the restructured Texas electricity market?

On January 1, 2007, the Electric Reliability Council of Texas (ERCOT) market became the first restructured market in the US to completely remove caps on the prices which could be charged to residential energy consumers by the retailers associated with the traditional or incumbent utility service providers. Our analysis suggests that the expiration of the price-to-beat (PTB) price caps may have led to a reduction in the average prices charged by competitive retail electric providers (REPs).     

Intermittently renewable energy,optimal capacity mix and prices in a deregulated electricity market

This paper assesses the effect of intermittently renewable energy on generation capacity mix and market prices. We consider two generating technologies: (1) conventional fossil-fueled technology such as combined cycle gas turbine (CCGT), and (2) sunshine-dependent renewable technology such as photovoltaic cells (PV). In the first stage of the model (game), when only the probability distribution functions of future daily electricity demand and sunshine are known, producers maximize their expected profits by determining the CCGT and PV capacity to be constructed. In the second stage, once daily demand and sunshine conditions become known, each producer selects the daily production by each technology, taking the capacities of both technologies as given, and subject to the availability of the PV capacity, which can be used only if the sun is shining. Using real-world data for Israel, we confirm that the introduction of PV technology amplifies price volatility. A large reduction in PV capacity cost increases PV adoption but may also raise the average price. Thus, when considering the promotion of renewable energy to reduce CO₂ emissions, regulators should assess the behavior of the electricity market, particularly with respect to characteristics of renewable technologies and demand and supply uncertainties.     

Electricity regulation and electricity market reforms in China

The electricity industry of China has been in a process of reforms since the 1980s. This paper gives a review on the three main stages of reforms in China so as to trace out key features of various reform measures including those for power investment financing, the separation between government and power enterprises, and the division between power generation firms and power grids. The findings suggest that further regulatory change in China's electricity market reform is necessary when integration of the electricity markets and increased competition are paving the way ahead for a market-oriented structure. Prospective electricity regulation in the form of a strong legal system and effective institutions that protect market competition and promote appropriate incentives for efficiency are suggested in the paper.     

Carbon prices,institutions, technology and electricity generation firms in two Australian states

A relationship exists for the liberalised Australian electricity supply industry between institutional structures and technological change. The traditional institutional framework has been based on centralised generation and a regulated vertically integrated monopoly structure. This paper investigates the issues of institutional and technological change using the social cost perspective (including externalities), and focuses on the imperatives of greenhouse gas emission reductions.     

The merit-order effect: A detailed analysis of the price effect of renewable electricity generation on spot market prices in Germany

The German feed-in support of electricity generation from renewable energy sources has led to high growth rates of the supported technologies. Critics state that the costs for consumers are too high. An important aspect to be considered in the discussion is the price effect created by renewable electricity generation. This paper seeks to analyse the impact of privileged renewable electricity generation on the electricity market in Germany. The central aspect to be analysed is the impact of renewable electricity generation on spot market prices. The results generated by an agent-based simulation platform indicate that the financial volume of the price reduction is considerable. In the short run, this gives rise to a distributional effect which creates savings for the demand side by reducing generator profits. In the case of the year 2006, the volume of the merit-order effect exceeds the volume of the net support payments for renewable electricity generation which have to be paid by consumers.     

Short term forecasting of electricity prices for MISO hubs: Evidence from ARIMA-EGARCH models

This study estimates three time series models (ARIMA, ARIMA-EGARCH, and ARIMA-EGARCH-M) for hourly real time electricity prices for each of the five hubs of the Midwest Independent System Operator (MISO) and examines the in- and out-of-sample forecasting performance of the respective models. The results from the ARIMA models reveal the presence of autoregressive conditional heteroskedasticity. Recognizing the possibility of asymmetric time-varying volatility, the EGARCH specification for the variance equation demonstrates the presence of an inverse leverage effect in electricity prices for each hub. With respect to forecasts, no one model clearly dominates the others in terms of in-sample forecasting performance based on four forecast evaluation statistics. However, the ARIMA-EGARCH-M model outperforms the other models (Michigan hub is the exception) in terms of the out-of-sample forecasting performance.     

Industrial customer response to wholesale prices in the restructured Texas electricity market

This paper estimates the demand responsiveness of the 20 largest industrial energy consumers in the Houston area to wholesale price signals in the restructured Electric Reliability Council of Texas (ERCOT) market. Statistical analysis of their load patterns employing a Symmetric Generalized McFadden cost function model suggests that ERCOT achieved limited success in establishing a market that facilitates demand response from the largest industrial energy consumers in the Houston area to wholesale price signals in its second year of retail competition. The muted price response is at least partially because energy consumers who opt to offer their “interruptibility” to the market as an ancillary service are constrained in their ability to respond to wholesale energy prices.     

Mathematical modelling of electricity market with renewable energy sources

The paper addresses the electricity market with conventional energy sources on fossil fuel and non-conventional renewable energy sources (RESs) with stochastic operating conditions.A mathematical model of long-run (accounting for development of generation capacities) equilibrium in the market is constructed. The problem of determining optimal parameters providing the maximum social criterion of efficiency is also formulated.The calculations performed have shown that the adequate choice of price cap, environmental tax, subsidies to RESs and consumption tax make it possible to take into account external effects (environmental damage) and to create incentives for investors to construct conventional and renewable energy sources in an optimal (from the society view point) mix.