Electricity Markets in Transition: A Multi-Decade Micro-Model of Entry and Exit in Advanced Wholesale Markets

Peter Cramton, Emmanuele Bobbio (), David Malec () and Pat Sujarittanonta ()
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Emmanuele Bobbio: University of Cologne, Cologne, Germany 50923
David Malec: University of Maryland, College Park MD 20742
Pat Sujarittanonta: Chulalongkorn University, Bangkok, Thailand 10400

No 183, ECONtribute Discussion Papers Series from University of Bonn and University of Cologne, Germany

Abstract: "Electricity markets worldwide are undergoing a many‐decade transition in the way electricity is generated and consumed. The success of this transition depends critically on climate policy and market design. We model the most advanced electricity markets in the world to evaluate the impact of alternative policies on electricity market outcomes over the next 40 years, including costs, profits, social welfare, risks, and reliability. Each year, investors decide which resources enter and exit given forward‐looking consistent expectations about energy profits, prices, and costs. The model is unique in modeling investment decisions at the individual unit level based on precisely calculated profits from energy, reserves, and capacity markets. These profits depend critically on the resource structure, which changes each year with investor decisions. New and essential elements of electricity markets, such as battery storage and price responsive demand are fully integrated. The model provides detailed insights into how policies such as carbon pricing impact the transition to renewable energy."

Pages: 91 pages
Date: 2022-08
New Economics Papers: this item is included in nep-ene, nep-env, nep-reg and nep-sea
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Persistent link: https://EconPapers.repec.org/RePEc:ajk:ajkdps:183

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