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An institutional frame to compare alternative market designs in EU electricity balancing

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dc.contributor.author Glachant, Jean-Michel en_US
dc.contributor.author Saguan, Marcelo en_US
dc.contributor.other Massachusetts Institute of Technology. Center for Energy and Environmental Policy Research. en_US
dc.date.accessioned 2009-04-03T17:07:43Z
dc.date.available 2009-04-03T17:07:43Z
dc.date.issued 2007 en_US
dc.identifier 2007-001 en_US
dc.identifier.uri http://hdl.handle.net/1721.1/45067
dc.description.abstract The so-called "electricity wholesale market" is, in fact, a sequence of several markets. The chain is closed with a provision for "balancing," in which energy from all wholesale markets is balanced under the authority of the Transmission Grid Manager (TSO in Europe, ISO in the United States). In selecting the market design, engineers in the European Union have traditionally preferred the technical role of balancing mechanisms as "security mechanisms." They favour using penalties to restrict the use of balancing energy by market actors. While our paper in no way disputes the importance of grid security, nor the competency of engineers to elaborate the technical rules, we wish to attract attention to the real economic consequences of alternative balancing designs. We propose a numerical simulation in the framework of a two-stage equilibrium model. This simulation allows us to compare the economic properties of designs currently existing within the European Union and to measure their fallout. It reveals that balancing designs, which are typically presented as simple variants on technical security, are in actuality alternative institutional frameworks having at least four potential economic consequences: a distortion of the forward price; an asymmetric shift in the participants' profits; an increase in the System Operator's revenues; and inefficiencies. en_US
dc.format.extent 35 p en_US
dc.publisher MIT Center for Energy and Environmental Policy Research en_US
dc.relation.ispartofseries MIT-CEEPR (Series) ; 07-001WP. en_US
dc.title An institutional frame to compare alternative market designs in EU electricity balancing en_US
dc.type Working Paper en_US
dc.identifier.oclc 157035424 en_US


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