Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/180919
Authors: 
Eisenack, Klaus
Mier, Mathias
Year of Publication: 
2018
Series/Report no.: 
Oldenburg Discussion Papers in Economics V-411-18
Abstract: 
We extend the theory of peak-load pricing by considering that the production with different technologies can be adjusted within their capacity at different speeds. In the established analysis, all production decisions can be made after the random variables realize. In our setting, in contrast, some decisions are made before, others after. We consider fixed load and three types of capacities: medium-dispatchable capacity needs to be scheduled ahead of actual production, non-dispatchable capacity produces randomly, and highly-dispatchable capacity can instantly adjust. If capacities differ in their dispatchability, some standard results of peak-load pricing break down, e.g., not all types of capacity will be employed. Either a system with medium-dispatchables only, or a system dominated by non-dispatchables and supplemented by highly-dispatchables occurs, where non- and highly-dispatchables could be substitutes or complements. For the latter system capacity decisions cannot be decentralized by markets since costs recovery is not possible.
Subjects: 
peak-load pricing
dispatchability
costs recovery
market design
renewable energy
energy transition
JEL: 
Q21
Q41
Q42
L94
L97
L98
Document Type: 
Working Paper
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