Two Economic Papers: I. Monopsony Power and the Supply of Power from Small Generating Stations; II. A Preliminary Economic Analysis of the Value of Contributions by Small Dams to System Generation Reliability

摘要

A small, private developer of an electric-generation station without an immediate demand for his output must sell his power through the transmission and distribution system of the electric utility within whose service area the developer's station is located. This effective control of the market (through the ownership of the local grid) provides the utility with monopsony buying power over potential suppliers of electric generation. What this power implies in the small-station-generator market, in the retail market, and to the development of the small power production is examined in Economic Paper I. The analysis shows the associated deadweight loss in that market and the final product attributable to the monopsony power. In Economic Paper II, a framework is established that determines the value of capital for capacity when that capacity does not necessarily produce electricity, but is in place to assure system reliability. The Energy Law Institute believes it is reasonable to view small dams, even with highly varying outputs, as positively contributing to system reliability and that the supplier should be remunerated. (ERA citation 05:038242)