Designing Electricity Auctions

Natalia Fabra (), Nils-Henrik M. von der Fehr and David Harbord ()

Microeconomics from EconWPA

Abstract: Motivated by the new auction format introduced in the England and Wales electricity market, as well as the recent debate in California, we characterize bidding behavior and market outcomes in uniform and discriminatory electricity auctions. We find that uniform auctions result in higher average prices than discriminatory auctions, but the ranking in terms of productive efficiency is ambiguous. The comparative effects of other market design features, such as the number of steps in suppliers' bid functions, the duration of bids and the elasticity of demand are also analysed. We also consider the relationship between market structure and market performance in the two auction formats. Finally, we clarify some methodological issues in the analysis of electricity auctions. In particular, we show that analogies with continuous share auctions are misplaced so long as firms are restricted to a finite number of bids.

Keywords: Market design; electricity; multi-unit auctions; regulatory reform (search for similar items in EconPapers)
JEL-codes: D44 L94 L11 L13 L51 (search for similar items in EconPapers)
Date: 2002-11-21, Revised 2004-01-29
Note: Type of Document - pdf; prepared on PC-TEX; pages: 37
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Related works:
Journal Article: Designing Electricity Auctions (2006)
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Persistent link: http://EconPapers.repec.org/RePEc:wpa:wuwpmi:0211017

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