Deregulation in electricity: Understanding strategic and regulatory risk

Deregulation in electricity: Understanding strategic and regulatory risk

0.00 Avg rating0 Votes
Article ID: iaor2000903
Country: United Kingdom
Volume: 50
Issue: 4
Start Page Number: 337
End Page Number: 344
Publication Date: Apr 1999
Journal: Journal of the Operational Research Society
Authors: ,
Keywords: simulation
Abstract:

This paper is motivated by our experiences since 1990 with developing system simulation models to help UK companies in the restructured electricity industry understand the radically different market within which they must become competitive. When public utilities such as electricity have been restructured, deregulated and/or privatised, the process has often been associated with a major change in the competitive environment. As a consequence, the strategic and regulatory uncertainties ahead for these companies are unprecedented. In such a market there has been no historical evolution and all the participants including the regulatory institutions have very little understanding of how it will operate in the short term and evolve in the future. In this situation, the use of system dynamic models appears to offer an attractive way of gaining insights into how aspects of the competitive market might evolve. In the absence of real experience and relevant analogies, learning from models assumes a key role. Such models cannot be validated empirically, but can be developed to represent how the system is designed to operate. From such a prototypical basis, sensitivity analysis can generate insights on the strategic opportunities created by failings in the market design, or its potential instability to shocks and market imperfections.

Reviews

Required fields are marked *. Your email address will not be published.