Power Markets Design

Diseño de Mercados Eléctricos (Power Market Design), by Juan Delgado

Published in “Tecnología, Economía y Regulación en el Sector Energético”. C. Aranzadi and C. López,  (eds.). Academia Europea de Ciencias y Artes/European Academy of Sciences and Arts, 2015.

Starting in the late 80s , the power sector has evolved from a vertically integrated structure, controlled by heavily regulated monopolists, to an unbundled scheme combining liberalized and regulated activities. Given the physical characteristics of electricity, markets do not arise naturally. The creation of power markets relies heavily on the design of the institutional framework and, in particular, the design of (wholesale and retail) markets, the regulation of access to networks and the nature and functions of the system operator. There is not a unique optimal market design. The solutions adopted in different countries differ in several dimensions such as the degree of centralization of wholesale markets, the role of the system operator and the ability of consumers to choose their supplier. These dimensions determine different wholesale and retail electricity market designs .

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