Energy prices in the presence of plant indivisibilities

Ronald Fischer () and Pablo Serra

No 108, Documentos de Trabajo from Centro de Economía Aplicada, Universidad de Chile

Abstract: In several countries (Chile, Bolivia, Argentina and Peru, among others), power plants are dispatched according to merit order, i.e., based on the marginal operating costs of the plants. In this scheme, the plant with the highest marginal cost sets the spot price at which firms trade the energy requires to fulfill their contracts. The model assumes that plants can operate at any level up to capacity, whereas real power plants have minimum operating levels. This implies that a low cost plant might have to reduce its supply in order to accommodate the minimum operating level of a more expensive power plant. This paper derives the welfare maximizing price rules in this case and shows that the standard peak load pricing rules no longer apply.

Date: 2001
New Economics Papers: this item is included in nep-ene and nep-mic
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
http://www.cea-uchile.cl/wp-content/uploads/doctrab/ASOCFILE120030327171527.pdf (application/pdf)

Related works:
Journal Article: Energy prices in the presence of plant indivisibilities (2003)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:edj:ceauch:108

Access Statistics for this paper

More papers in Documentos de Trabajo from Centro de Economía Aplicada, Universidad de Chile Contact information at EDIRC.
Bibliographic data for series maintained by ().