Deregulated Electricity Market and Auctions: The Italian Case

Luca Grilli

.

DOI: 10.4236/ib.2010.23030                

Abstract

The Electricity Market (in Europe) undergoes a period of transformations never seen before. The competitive model suggested by the European Commission is based on a gradual increase in the classes of consumers able to choice, freely, their providers. In general, liberalization, deregulation, competition result in a spur to development and low prices for consumers. The Electricity Market isn’t likely to follow such a rule. Electricity Markets are best described and analyzed as first-price multi-unit procurement iterated auctions. In this paper we present an analysis of the Italian case in order to show the effects of deregulation on final prices for users.

Keywords

Electricity Market, Auctions, Oligopoly, Deregulation

Conflicts of Interest

The authors declare no conflicts of interest.

References

[1]	S. Hunt, “Making Competition Work in Electricity,” John Wiley&Sons, Inc., New York, 2002.
[2]	L. Ausubel, “An Efficient Ascending-Bid Auction for Multiple Objects,” The American Econimic Review, Vol. 94, No. 5, 2004, pp. 1452-11475.
[3]	P. B. Luh, W. E. Blankson, Y. Chen, J. H. Yan, G. A. Stern, S. C. Chang and F. Zhao, “Payment Cost Minimization Auction for Deregulated Electricity Markets Using Surrogate Optimization,” IEEE Transactions on Power Systems, Vol. 21, No. 2, 2006, pp. 568-578.
[4]	P. B. Luh, W. E. Blankson, Y. Chen, J. H. Yan, G. A. Stern and F. Zhao, “Payment Cost Minimization with Demand Bids and Partial Capacity Cost Compensations for Day-Ahead Electricity Auctions,” Electric Power Networks Efficiency and Security, Working Paper, University of Connecticut, Connecticut, 2005.
[5]	N. Shunda, “Strategic Behavior in Day-Ahead and Real- Time Markets for Electricity: Offer Cost or Payment Cost Minimization?” Working Paper, University of Connecticut, Connecticut, 2005.
[6]	C. Wolfram, “Electricity Markets: Should the Rest of the World Adopt the UK Reforms?” Regulation, Vol. 22, No. 4, 1999, pp. 48-53.
[7]	S. Rassenti, V. Smith and B. Wilson, “Discriminatory Price Auctions in Electricity Markets: Low Volatility at the Expense of High Price Levels,” Journal of Regulatory Economics, Vol. 23, No. 2, 2003, pp. 109-123.
[8]	K. Abbink, J. Brandts and T. McDaniel, “Asymmetric Demand Information in Uniform and Discrimintory Call Auctions: An Experimental Analysis Motivated by Electricity Markets,” Journal of Regulatory Economics, Vol. 23, No. 2, 2003, pp. 125-144.
[9]	L. Ausubel and P. Cramton, “Demand Reduction in Multi-Unit Auctions with Varying Numbers of Bidders: Theory and Evidence from a Field Experiment,” Working Paper, University of Maryland, Maryland, 2002.
[10]	T. O. Léautier, “Transmission Constraints and Imperfect Markets in Power,” Journal of Regulatory Economics, Vol. 19, No. 1, 2001, pp. 27-54.
[11]	T. O. Léautier, “Electricity Auctions,” Journal of Economics & Management Strategy, Vol. 10, No. 3, 2001(a), pp. 331-358.
[12]	S. L. Puller, “Pricing and Firm Conduct in California’s Deregulated Electricity Market,” Review of Economics and Statistics, Vol. 89, No. 1, 2007, pp. 75-87.
[13]	F. A. Wolak and R. H. Patrick, “The Impact of Market Rules and Market Structure on the Price Determination Process in the England and Wales Electricity Market,” Working Paper 8248, National Bureau of Economic Research, 2001.
[14]	A. Horta?su and S. L. Puller, “Understanding Strategic Bidding in Multi-Unit Auctions: A Case Study of the Texas Electricity Spot Market,” The RAND Journal of Economics, Vol. 39, No. 1, 2008, pp. 86-114.
[15]	D. Finon, “L’Intégration des Marchés Electriques Européens: de la Juxtaposition de Marchés Nationaux à l’Etablissement d’un Marché Régional,” Economies et Societes, Vol. 37, No. 1-2, 2001, pp. 55-87.