Economics at your fingertips  

Economizing the Uneconomic: Markets for Reliable, Sustainable, and Price Efficient Electricity

Mohammad Rasouli and Demosthenis Teneketzis
Additional contact information
Mohammad Rasouli: Civil and Environmental Engineering Department, Stanford, Palo Alto, CA 94305, USA
Demosthenis Teneketzis: Electrical and Computer Engineering Department, University of Michigan, Ann Arbor, MI 48109, USA

Sustainability, 2021, vol. 13, issue 8, 1-38

Abstract: Current electricity markets do not efficiently achieve policy targets i.e., sustainability, reliability, and price efficiency. Thus, there are debates on how to achieve these targets by using either market mechanisms e.g., carbon and capacity markets, or non-market mechanisms such as offer-caps, price-caps, and market-monitoring. At the same time, major industry changes including demand response management technologies and large scale batteries bring more elasticity to demand; such changes will impact the methodology needed to achieve the above mentioned targets. This work provides market solutions that capture all three policy targets simultaneously and take into account the above-mentioned industry changes. The proposed solutions are based on: (i) a model of electricity markets that captures all the above mentioned electricity policy targets; (ii) mechanism design and the development of a framework for design of efficient auctions with constraints (individual, joint homogeneous, and joint non-homogeneous). The results show that, within the context of the proposed model, all policy targets can be achieved efficiently by separate capacity and carbon markets in addition to efficient spot markets. The results also highlight that all three policy targets can be achieved without any offer-cap, price-cap, or market monitoring. Thus, within the context of the proposed model, they provide clear answers to the above-mentioned policy debates.

Keywords: electricity policy; electricity market; mechanism design; auctions with constraints (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link) (application/pdf) (text/html)

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:

Access Statistics for this article

Sustainability is currently edited by Mr. Samuel Li

More articles in Sustainability from MDPI
Bibliographic data for series maintained by MDPI Indexing Manager ().

Page updated 2023-05-18
Handle: RePEc:gam:jsusta:v:13:y:2021:i:8:p:4197-:d:533014