The Electricity Market’s Design: An Unnecessarily Distorting and Costly Mechanism to Overcome

Joaquim Vergés-Jaime

Journal of Economic Issues, 2025, vol. 59, issue 1, 304-323

Abstract: The particular rules established for the wholesale electricity market in the EU, UK, United States, and other OECD countries have led to distorted results, especially since the end of 2020, in the way of erratic skyrocketing prices and extraordinary profits for power companies. This is because of the peculiar pricing design established, which is surmised to respond to the “marginal cost pricing” proposition (MCP) of mainstream economics. It is argued here that the present pricing design, besides challenging economic common sense, entails misapplying the MCP proposition itself; that basic features of the sector make, however, such a proposition scarcely relevant; and how the assumption of old economics myths about the sector makes the present market operation unnecessarily cumbersome. Consequently, elements for a more rational alternative market design and workings will be presented.

Date: 2025
References: Add references at CitEc
Citations:

Downloads: (external link)
http://hdl.handle.net/10.1080/00213624.2025.2455670 (text/html)
Access to full text is restricted to subscribers.

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:mes:jeciss:v:59:y:2025:i:1:p:304-323

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/MJEI20

DOI: 10.1080/00213624.2025.2455670

Access Statistics for this article

More articles in Journal of Economic Issues from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().