Abstract
Renewable energy sources produce less environmental impact and have little marginal cost. Thus, because of these characteristics, it is desirable to disseminate it for the purpose of economic efficiency. Because of the uncertainty in the supply of renewable energy and the special feature of electricity as a good, such as merit order curve, introducing forward markets is an essential factor in a liberalized market. In European countries, which have already established several mechanisms for managing liquidity including markets with several timelines, the market liquidity invites the investor to perform some speculative action. We present a simple electric power market model to analyze the speculative actions of electricity suppliers and the price effect of such actions. Moreover, we found that the speculative action improves the inelasticity of the demand in electricity market.
Highlights
In Japan, power-related administrative reforms have been progressing since the 2011 earthquake.The liberalization of the electricity market is a major pillar of this policy
From the ministry of economy, trade and industry (METI) report [1], until now, the power market has been monopolized by regional corporations, and a single large power company has provided almost all of the power in a given region
We introduce a speculative model with heterogeneous beliefs to the electricity market
Summary
In Japan, power-related administrative reforms have been progressing since the 2011 earthquake. The liberalization of the electricity market is a major pillar of this policy. From the ministry of economy, trade and industry (METI) report [1], until now, the power market has been monopolized by regional corporations, and a single large power company has provided almost all of the power in a given region. The Tokyo Electric Power Company, which caused a nuclear accident, is one such company. The public reaction on the accident has led to a demand for a system that will allow consumers to select a preferred power company. The liberalization of electricity retail began in 2016, and it is expected to continue being liberalized going forward
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