Power is not energy, Watts are as valuable as Joules

Minh Ha-Duong

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Abstract: This article discusses the proposed introduction of a two-part tariff in Vietnam's electricity markets. A two-part tariff in the electricity sector refers to a billing mechanism where consumers are charged based on two distinct components: capacity and consumption. The capacity charge is determined by the maximum power capacity (in kilowatts, kW) that a consumer can draw from the system at any given moment. This is akin to paying a rental fee for accessing power up to a certain limit. The consumption charge, on the other hand, is based on the actual amount of electricity used by the consumer over a period, measured in kilowatt-hours (kWh). It examines how a two-part tariff, including capacity payments, could be applied to Vietnam's wholesale electricity market to support investment in dispatchable generation like gas power plants. These plants are needed to complement the growing share of variable renewable energy sources like wind and solar. The article will draw on international experiences, such as the recent introduction of capacity payments for coal power plants in China, to explore the potential benefits and design considerations for such a mechanism.

Keywords: capacity payments; Vietnam; electricity market (search for similar items in EconPapers)
Date: 2024-05-20
New Economics Papers: this item is included in nep-ene, nep-env, nep-reg and nep-sea
Note: View the original document on HAL open archive server: https://hal.science/hal-04607117v1
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Published in 2024, pp.11-14

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-04607117

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