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    DG (Distributed Generation)

    Using small amounts of generation on a utility's distribution system to meet local (substation level) peak loads and/or to displace the need to build new or upgrade existing local distribution lines; newer technologies include fuel cells, wind power, solar cells, reciprocating engines and microturbines (also called distributed power); problems include lack of standardized interconnection requirements, permitting, siting and safety hazards for interconnection of large numbers of small generating units
    Fabra, Natalia, Nils-Hendrik von der Fehr, and David Harbord. “Designing Electricity Auctions: Uniform, Discriminatory and Vickrey.” In, 2002.Abstract

    Fabra, Natalia, Nils-Hendrik von der Fehr and David Harbord. Designing Electricity Auctions: Uniform, Discriminatory and Vickrey. 9 November 2002. Paper, 37 pages.

    Motivated by the new auction format introduced in the England and Wales electricity market and the recent debate in California, we charac- terize bidding behavior and market outcomes in uniform, discriminatory and Vickrey electricity auctions. The aim is to gain an improved under- standing of how different auction formats affect the degree of competition and overall welfare in decentralized electricity markets. We find that the uniform auction is (weakly) outperformed in consumer surplus terms by the discriminatory auction, but that uniform auctions are (weakly) more efficient. Vickrey auctions guarantee productive efficiency, but at the expense of large payments to firms. The overall welfare ranking of the auctions is thus ambiguous. The paper also clarifies some methodological issues in the analysis of electricity auctions. In particular we show that analogies with continuous share auctions are misplaced so long as firms are restricted to a finite number of bids. We also provide a characterization of multi-unit Vickrey auctions with reserve pricing.

     

     

    Derivative

    A specialized security or contract whose value is based on an underlying security or factor such as a price index, and that may include options, futures, forwards, etc.

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