Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/161515
Authors: 
Rose, Amy
Stoner, Robert
Pérez-Arriaga, Ignacio
Year of Publication: 
2016
Series/Report no.: 
WIDER Working Paper 2016/132
Abstract: 
High levels of inflexible bilateral trade in southern Africa have limited the participation in the competitive short-term markets, leading to inefficient use of energy infrastructure and blocking the South African Power Pool's long-term goal of transitioning from a cooperative to competitive market. Under the current supply and investment climate, governments and market participants are unlikely to forego their preference for long-term contracts owing to concerns about security of supply and risk mitigation. In this paper, we demonstrate that the current method for integrating bilateral and market trading introduces inefficiencies in the use of generation and transmission infrastructure, reduces total trade, and increases system costs. We propose and test an alternative method based on contracts for differences and implicit auctions to ensure the same level of security of supply for contract holders while minimising market distortions.
Subjects: 
bilateral contract
market design
power pool
JEL: 
C61
O21
Q40
R58
ISBN: 
978-92-9256-176-5
Document Type: 
Working Paper

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