Competitiveness assessment of Iran's restructured electricity market

Ali Nazemi and Mehdi Mashayekhi

Energy Economics, 2015, vol. 49, issue C, 308-316

Abstract: Iran's electricity market was restructured mostly to enhance its production efficiency. Nonetheless, the experience of liberalized electricity markets indicates that market establishment would be insufficient to produce competitive results. To determine whether the restructured market is moving toward competition, this paper assesses production efficiency in Iran's electricity market during high demand periods in 2006 as the first year of the restructured market's performance, and in 2012 as the last year with available data. We compared counterfactual benchmark outcomes to the actual dispatches to determine the production efficiency. Moreover, Iran's power market is a discriminatory, day-ahead auction; therefore, we considered the market design in the competitive benchmark. We found that the production was inefficient in both 2006 and 2012. More importantly, the production in the market is becoming increasingly inefficient over time due to exercising market power and distortion of the market's production by strategic firms. Not only were strategic firms distorting the market's production, but they were also learning to exercise more non-competitive behavior because these firms distorted the production in 2012 eight times more than they did in 2006.

Keywords: Iran's pay-as-bid electricity market; Production efficiency; Welfare loss; Production distortion (search for similar items in EconPapers)
JEL-codes: D04 D22 D41 D43 D60 (search for similar items in EconPapers)
Date: 2015
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:eneeco:v:49:y:2015:i:c:p:308-316

DOI: 10.1016/j.eneco.2015.02.019

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