Publications

Murphy, Frederic and Yves Smeers. On the Impact of Forward Markets on Investment in Oligopolistic Markets with Reference to Electricity. Part I: Deterministic Demand. 15 June 2007, 38 pages.

 

 

This paper analyzes the properties of three capacity games in an oligopolistic market with Cournot players and deterministic demand. In the first game, capacity and the operation of that capacity is determined simultaneously. This is the classic open-loop Cournot game. In the second game, capacity is decided in the first stage and the operation of that capacity is determined in the second stage. The first-stage decision of each player is contingent on the solution of the second-stage game. This is a two-stage, closed-loop game. We show that when the solution exists, it is the same as the solution in the first game. However, it does not always exist. The third game has three stages with a futures position taken between the capacity stage and the operations stage and is also a closed-loop game. As with the second game, the equilibrium is the same as the open-loop game when it exists. However, the conditions for existence are more restrictive with forward markets added. When both games have an equilibrium, the solution values are identical. The results are very different from games with no capacity stage as studied by Allaz and Vila (1993), where they concluded that forward markets can ameliorate market power.

 

Murphy, Frederic and Yves Smeers. On the Impact of Forward Markets on Investments in Oligopolistic Markets with Reference to Electricity. Part II: Uncertain Demand. 18 June 2007, 39 pages.

 

 

There is a general agreement since Allaz-Vila’s seminal contribution that forward contracts mitigate market power on the spot market. This result is widely quoted and elaborated in studies of restructured power markets where it is generally believed that generators tend to exploit the special characteristics of this industry in order to extract higher prices. Allaz-Vila established their result under the assumption that the production capacities of the players are infinite. This assumption might have applied to the power industry in the early days of restructuring but it no longer holds in today environment of tightening capacity. We show that the Allaz-Vila result no longer holds when capacities are endogenous and constraining generation. Specifically the future market can enhance or mitigate market power when capacities are endogenous and demand is unknown at the time of investment. This result complements Part 1 where the authors show that forward markets do not mitigate market power when capacities are endogenous and demand is known at the time of investment. It also complements other work by Grimm and Zoettl who show that forward markets systematically enhance market power in some symmetric capacity-constrained markets.

 

Murphy, Frederic and Yves Smeers. On the Impact of Forward Markets on Investments in Oligopolistic Markets with Reference to Electricity. Part II: Uncertain Demand. 18 June 2007, 39 pages.

 

 

There is a general agreement since Allaz-Vila’s seminal contribution that forward contracts mitigate market power on the spot market. This result is widely quoted and elaborated in studies of restructured power markets where it is generally believed that generators tend to exploit the special characteristics of this industry in order to extract higher prices. Allaz-Vila established their result under the assumption that the production capacities of the players are infinite. This assumption might have applied to the power industry in the early days of restructuring but it no longer holds in today environment of tightening capacity. We show that the Allaz-Vila result no longer holds when capacities are endogenous and constraining generation. Specifically the future market can enhance or mitigate market power when capacities are endogenous and demand is unknown at the time of investment. This result complements Part 1 where the authors show that forward markets do not mitigate market power when capacities are endogenous and demand is known at the time of investment. It also complements other work by Grimm and Zoettl who show that forward markets systematically enhance market power in some symmetric capacity-constrained markets.

 

University of California Energy Institute. A New Design Tool for Visualizing the Energy Implications of California's Climates. April 2007. Paper, 11 pages.

Sotkiewicz, Paul and Lynne Holt. Public Utility Commission Regulation and Cost-Effectiveness of Title IV: Lessons for CAIR. March 2005. Article, 13 pages.

Sotkiewicz, Paul and Lynne Holt. Public Utility Commission Regulation and Cost-Effectiveness of Title IV: Lessons for CAIR. March 2005. Article, 13 pages.

Ellison, Chris. Transmission Chickens and Alternative Energy Eggs. 16 March 2007. Presentation, 17 pages.

Mansour, Yakout. Transmission Chickens and Alternative Energy Eggs. 16 March 2007. Presentation, 5 pages.

Grueneich, Dian. Transmission Chickens and Alternative Energy Eggs: The CPUC Solution. 16 March 2007. Presentation, 7 pages.

Pizer, William. U.S. Federal Proposals. 1 June 2007. Presentation, 10 pages.

Von Hoene, William Jr. All the King's Horses and All The King's Men: Can Humpty Dumpty Be Put Together Again? 31 May 2007. Presentation, 11 pages.

Harvill, Terry. All The King's Horses and All The King's Men: Can Humpty Dumpty Be Put Together Again? 31 May 2007. Presentation, 22 pages.

Glachant, Jean-Michel. Brown Out or Black Out in Europe in November 2006: to entertain ... with EU Colours Out? 16 January 2007. Presentation, 14 pages.

Star, Anthony. Can Real-Time Pricing Be The Real Deal? 15 March 2007. Presentation, 15 pages.

Federal Energy Regulatory Commission. Conference on Competition in Power Markets (free Webcast). 27 February 2007. The first in a series of conferences to examine the state of competition in wholesale power markets.

Sturzenegger, Federico. Contract? What is a Contract? 15 March 2007. Presentation, 11 pages.

Tierney, Susan and Edward Kahn (Analysis Group). A Cost-Benefit Analysis of the New York Independent System Operator: The Initial Years. March 2007. Report, 52 pages.

Tierney, Susan and Edward Kahn (Analysis Group). A Cost-Benefit Analysis of the New York Independent System Operator: The Initial Years. March 2007. Report, 52 pages.

Mukerji, Rana. Demand Response in Wholesale Electricity Markets. 15 March 2007. Presentation, 18 pages.

Hogan, William. Electricity Market Hybrids: Mixed Market Designs and Infrastructure Investments. September 18, 2007. Presentation, 26 pages.