Contracting for the second best in dysfunctional electricity markets

Arina Nikandrova () and Jevgenijs Steinbuks
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Arina Nikandrova: Birkbeck, University of London

Journal of Regulatory Economics, 2017, vol. 51, issue 1, No 3, 71 pages

Abstract: Abstract Power pools constitute a set of sometimes complex institutional arrangements for efficiency-enhancing coordination among power systems. In many developing countries, where such institutional arrangements can’t be established over the short term, there still can be scope for voluntary electricity-sharing agreements among power systems. Using a particular type of efficient risk-sharing model with no commitment we demonstrate that second-best coordination improvements can be achieved with low to moderate risks of participants leaving the agreement. In the absence of an impartial market operator who can observe production fluctuations in connected power systems, establishing quasi-markets for trading excess electricity helps to achieve some cooperation in mutually beneficial electricity sharing.

Keywords: Electricity trade; Risk sharing arrangements; Self-enforcing contracts (search for similar items in EconPapers)
JEL-codes: C73 L94 O13 (search for similar items in EconPapers)
Date: 2017
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Working Paper: Contracting for the second best in dysfunctional electricity markets (2014)
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DOI: 10.1007/s11149-016-9313-7

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