Composition of Electricity Generation Portfolios, Pivotal Dynamics, and Market Prices
Albert Banal-Estañol, Augusto Rupérez Micola
Management Science · 2009 · Volume 55 · Issue 11
Abstract
We use simulations to study how the diversification of electricity generation portfolios influences wholesale prices. We find that the relationship between technological diversification and market prices is mediated by the supply-to-demand ratio. In each demand case there is a threshold where pivotal dynamics change. Pivotal dynamics pre- and post-threshold are the cause of nonlinearities in the influence of diversification on market prices. The findings are robust to changes in the main market assumptions.
Keywords
electricity, market power, simulations, technology diversification
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