CXO

New Indices Of Market Power In Transmission-Constrained Electricity Markets

Date Added: Aug 2010
Format: PDF

MARKET power continues to be a problematic issue in restructured electricity markets, with the interaction between tight supply conditions and transmission limits posing serious difficulties for market operations, particularly in the context of "Energy-only" markets such as the Electric Reliability Council Of Texas (ERCOT) balancing market and the upcoming ERCOT "Nodal" - that is, "Locational Marginal Pricing," (LMP) market - to be introduced in late 2010. In energy-only markets, since there is no installed capacity payment mechanism as in the Northeast U.S. restructured markets, competitive energy prices must occasionally rise above the highest typical marginal costs in the system in order for generation asset owners to recover their investments and to encourage new investment to ensure resource adequacy to cope with demand growth.