A pricing mechanism to jointly mitigate market power and environmental externalities in electricity markets

Varawala, L, Hesamzadeh, M R, Dan, G, Bunn, D and Rosellon, J (2023) A pricing mechanism to jointly mitigate market power and environmental externalities in electricity markets. Energy Economics, 121. ISSN 0140-9883 (In Press) OPEN ACCESS

Abstract

The electricity industry has been one of the first to face technological changes motivated by sustainability concerns. Whilst efficiency aspects of market design have tended to focus upon market power concerns, the new policy challenges emphasise sustainability. We argue that market designs need to develop remedies for market conduct integrated with regard to environmental externalities. Accordingly, we develop an incentive-based market clearing mechanism using a power network representation with a distinctive feature of incomplete information regarding generation costs. The shortcomings of price caps to mitigate market power, in this context, are overcome with the proposed mechanism.

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Item Type: Article
Subject Areas: Management Science and Operations
Date Deposited: 04 Apr 2023 16:19
Date of first compliant deposit: 04 Apr 2023
Last Modified: 23 Jul 2024 01:57
URI: https://lbsresearch.london.edu/id/eprint/2840
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