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Production cost minimization versus consumer payment minimization in electricity pools

C. Vázquez, M. Rivier, I.J. Pérez-Arriaga

Algorithms that involve some kind of optimisation have been adopted by several electricity pools as a tool to clear the market. Traditionally, this kind of models were used on a cost minimising basis, but recent papers have pointed out that alternative dispatches may be obtained that, even with higher production costs, provide cheaper electricity prices for consumers. This paper studies this new payment-minimisation approach, focusing on the long-term economic signals that it provides and analysing their impact on future investments. Our results show that minimising consumer payment results in discriminatory scheduling for certain generation resources and may cause, in the long-run, higher prices for consumers.

Keywords: Deregulation, power generation dispatch, pool design, market clearing algorithm, unit commitment, marginal pricing

IEEE Transactions on Power Systems. Volume: 17 Issue: 1 Pages: 119-127

Journal Impact Factor: JCR impact factor 5.255 (2017)

DOI reference: DOI icon 10.1109/59.982202    

Published on paper: February 2002.

    Topics research:
  • *Energy markets design and regulation

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