Supply Flexibility and risk transfer in electricity markets

Claude Crampes () and Jérôme Renault ()
Additional contact information
Claude Crampes: TSE-R - Toulouse School of Economics - UT Capitole - Université Toulouse Capitole - Comue de Toulouse - Communauté d'universités et établissements de Toulouse - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement
Jérôme Renault: TSE-R - Toulouse School of Economics - UT Capitole - Université Toulouse Capitole - Comue de Toulouse - Communauté d'universités et établissements de Toulouse - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement

Working Papers from HAL

Abstract: The producers of electricity using dispatchable plants rely on partially flexible technologies to match the variability of both demand and production from renewables. We analyse upward and downward flexibility in a two-stage decision process where firms compete in quantities produced ex ante at low cost and ex post at high cost to supply a random residual demand. We first compute the first best and competitive outcomes, then we determine the subgame perfect equilibria corresponding to two market designs : one where all trade occurs in a spot market with known demand, the other where a day-ahead market with random demand is added to the ex-post market, first in a general setting, then using a quadratic specification. We show that being inflexible can be more profitable than being flexible. We also show that adding a day-ahead market tothe spot market increases welfare but transfers risks from firms to consumers.

Keywords: Intra-day market; Day-ahead market; Risk transfer; Electricity; Flexibility; Market design (search for similar items in EconPapers)
Date: 2025-08-30
Note: View the original document on HAL open archive server: https://hal.science/hal-05289815v1
References: Add references at CitEc
Citations:

Downloads: (external link)
https://hal.science/hal-05289815v1/document (application/pdf)

Related works:
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:hal:wpaper:hal-05289815

Access Statistics for this paper

More papers in Working Papers from HAL
Bibliographic data for series maintained by CCSD ().