Group for Research in Decision Analysis

Economizing the uneconomic: Markets for reliable, sustainable and price efficient electricity

Demosthenis Teneketzis University of Michigan, United States

The energy policy targets are sustainable and reliable electricity with efficient prices under uncertain demand. In the restructured electricity industry these objectives must be achieved with markets and incentives. Current electricity markets do not achieve the above-stated targets efficiently,thus, there are debates about the approaches needed to achieve efficiency. These debates are centered around the use of carbon markets, capacity markets, and the set of non-market mechanisms such as offer-caps, price-caps and market monitoring. We provide a comprehensive model of the industry with the policy targets, considering emerging technological changes, and develop a framework for auctions with constraints so as to propose market-based implementations of the electricity policy targets and to address the corresponding debates.

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