Composition of electricity generation portfolios, pivotal dynamics, and market prices

Composition of electricity generation portfolios, pivotal dynamics, and market prices

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Article ID: iaor200971664
Country: United States
Volume: 55
Issue: 11
Start Page Number: 1813
End Page Number: 1831
Publication Date: Nov 2009
Journal: Management Science
Authors: ,
Keywords: electricity
Abstract:

We use simulations to study how the diversification of electricity generation portfolios influences wholesale prices. We find that the relationship between technological diversification and market prices is mediated by the supply-to-demand ratio. In each demand case there is a threshold where pivotal dynamics change. Pivotal dynamics pre- and post-threshold are the cause of nonlinearities in the influence of diversification on market prices. The findings are robust to changes in the main market assumptions.

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