Finding Opportunity in Economic Dispatch: Saving Fuels Without Impacting Retail Electricity Prices

Marie Petitet, Frank Felder and Amro Elshurafa
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Amro Elshurafa: King Abdullah Petroleum Studies and Research Center

Discussion Papers from King Abdullah Petroleum Studies and Research Center

Abstract: For important domestic public policy reasons, many oil- and natural-gas-producing countries allocate fuels to their electricity sector at administratively set prices that are below fuel opportunity costs. This article shows that dispatching power units based on fuel opportunity costs can significantly increase efficiency, while, for political reasons, end users’ electricity prices can continue to be defined based on administratively set fuel prices. In addition, opportunity cost dispatch can bring about environmental benefits when it results in switching the priority levels of oil and gas units in the merit order. This work also resolves the electricity trading dilemma since countries do not want to export electricity based on domestic prices.

Pages: 28
Date: 2024-03-17
New Economics Papers: this item is included in nep-ene and nep-reg
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https://www.kapsarc.org/research/publications/find ... -electricity-prices/ First version, 2024

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Persistent link: https://EconPapers.repec.org/RePEc:prc:dpaper:ks--2024-dp03

DOI: 10.30573/KS--2024-DP03

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