INVESTMENT DYNAMICS AND LONG TERM PRICE TRENDS IN COMPETITIVE ELECTRICITY MARKETS

摘要

This paper analyses long term price trends in deregulated electricity markets. A price model using explicit supply and demand states is introduced. A stochastic model for demand growth drives future uncertainty, and investors respond by adding new capacity based on price feedback. The effects on price dynamics of delays in the supply response, through information lag or construction time, are illustrated through simulations. The model is extended to account for the physical reliability problem resulting from a lack of generation capacity. It is shown how inappropriate intervention by regulators, through the use of price caps, can result in a critical decrease in the markets' reserve margin.