 Marginal cost and congestion in the Italian electricity market: An indirect estimation approachSimona Bigerna (), Carlo Andrea Bollino () and Paolo Polinori Energy Policy, 2015, vol. 85, issue C, 445-454 Abstract: In this paper we construct an indirect measure of the supply marginal cost function for the main generators from the observed bid data in the Italian electricity market in the period 2004–2007. We compute the residual demand function for each generator, taking explicitly into account the issue of transmission line congestion. This procedure allows recovering correct zonal Lerner index and the implied measure of the marginal cost function. We find evidence of a stable U-shaped marginal cost function for three main Italian generators, but a flat function for ENEL, the former national monopolist. The policy relevance of our approach lies in the possibility to offer some empirical knowledge of the marginal cost function of each generator to the regulator to design appropriate policy measures geared to the promotion of competitive market conditions. We propose a new market surveillance mechanism, which is based on the principle of sanctioning excessive deviations from the estimated measure of the marginal cost function presented in this work. Keywords: Electricity markets; Congestions; Marginal cost; Zonal Lerner index; Mitigation measures (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:enepol:v:85:y:2015:i:c:p:445-454 DOI: 10.1016/j.enpol.2015.04.009 Access Statistics for this article Energy Policy is currently edited by N. France More articles in Energy Policy from Elsevier |
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