Article ID: | iaor20011356 |
Country: | Netherlands |
Volume: | 125 |
Issue: | 1 |
Start Page Number: | 1 |
End Page Number: | 17 |
Publication Date: | Aug 2000 |
Journal: | European Journal of Operational Research |
Authors: | Loulou Richard, Savard Gilles, Lavigne Denis |
Keywords: | optimization |
We present a general methodology to study the electricity market of a country or region, under various pricing mechanisms. The approach is based on modifications of a large-scale techno-economic model, and is applied to a realistic model for the Province of Québec. Mathematical programming and a new decomposition procedure are used to simulate different electricity pricing schemes and their effects on the producer's and consumers' decisions. Three types of pricing are analyzed, each one corresponding to a different equilibrium: marginal cost pricing, leading to a pure competition equilibrium, an affine function of the marginal cost, leading to a regulated equilibrium, and monopolistic pricing, chosen by the producer to minimize its costs while knowing the optimal consumers' reaction to the proposed price of electricity (Stackelberg-type equilibrium). The three equilibria are described and justified, and a large-scale application to the province of Québec is presented and discussed in some detail.