Abstract
The electricity supply industry had undergo deregulation and restructuring toward becoming a more transparent and competitive electricity market environment. The pool market model is amongst the most preferred electricity market model. Even though it is a safe option to be more competitive and transparent electricity supply industry, there are issues on the welfare of the generators involved. This paper addresses the pricing issue in the pool market by extending the capacity payment mechanism in the single auction power pool. In the proposed model, the approach of minimum capacity payment involving the efficiency of the generators is introduced. A case study is conducted to illustrate the proposed model. An economic analysis is performed to highlight the merits of the proposed model with the pure pool in term of generation revenue. © 2016 The Authors, published by EDP Sciences.
Highlights
In the competitive electricity market, participation of generation companies and large consumers in bidding methodologies is for their own advantages
In order to achieve a maximum return, it is very important for the generation companies to formulate optimal bidding strategies with risk terminology before step into the electricity market, as the market clearing price (MCP) in this landscape is flexible [1]
Instead of open cycle gas turbine (OCGT), only combine cycle gas turbine (CCGT) and thermal plant type are chosen due to the efficiency and price offered by the generator
Summary
In the competitive electricity market, participation of generation companies and large consumers in bidding methodologies is for their own advantages. The electricity generating companies expect to maximize their profits and control the market price. Even though, they will suffer in great losses of market efficiency because their offers will deviate from the true marginal costs. Regardless of being the sensible and safe choice for a more competitive and straightforward power supply industry, there are issues on the welfare of the generators included. As reported by Zou et al [2], which utilized of the analytical paradigm of economic mechanism design theory is to deduce and design a customized pool-based market mechanism, in order to fulfill three major properties; incentive compatibility, individual rationality, and payment cost minimization
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