Econonomics of Energy and Environmental Policy

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Electricity Scarcity Pricing Through Operating Reserves

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Suppressed prices in real-time markets provide inadequate incentives for both generation investment and active participation by demand bidding. An operating reserve demand curve developed from first principles would improve reliability, support adequate scarcity pricing, and be straightforward to implement within the framework of economic dispatch. This approach would be fully compatible with other market-oriented policies. Better scarcity pricing would also contribute to long-term resource adequacy. Keywords: Electricity scarcity pricing, Resource adequacy, Operating reserves
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JEL Codes:L51: Economics of Regulation, L94: Electric Utilities, H23: Taxation and Subsidies: Externalities; Redistributive Effects; Environmental Taxes and Subsidies

Keywords: Electricity scarcity pricing, Resource adequacy, Operating reserves

DOI: 10.5547/2160-5890.2.2.4

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Published in Volume 2, Number 2 of The Quarterly Journal of the IAEE's Energy Economics Education Foundation.


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