a review of policy analysis purpose and capabilities of electricity system models abstract the aim of this study is to investigate the ability of electricity system models to provide scenario based insights for policy purposes a framework is built from a review of existing studies of model characteristics and their linkages to model scenario types which are linked to the purpose of policy problem analyses the framework can be used as a tool to structure the examination of electricity system models and guide electricity system model selection and enhancement in light of policy problem driven analyses an illustration of the framework is presented by a review of german electricity model scenario studies the review shows that current models are used for the policy purpose of indicator assessment and instrument comparison by quantification of indicators such as monetary or pollution impacts however they are not suitable to provide the means for option reduction problem exploration and political or societal paradigm change exploration as the endogenous model structure for these is missing a particular lack of endogenous treatment was found for renewable technology capacity change and policies learning and productivity growth based technological change socio political technical interactions and limited demonstrated use of uncertainty treatment techniques

competitive procurement of ancillary services by an independent system operator this paper discusses the competitive procurement of ancillary services by an independent system operator iso the paper assumes the existence of an underlying market for energy and explains why this energy market must be accompanied by a market for ancillary services these services include operating reserves and automatic generation control agc both of which may require generators that are infra marginal in the energy market to choose between supplying energy or ancillary services the paper discusses the design of an auction for these services that has formed the basis for the california iso s ancillary services market the paper also discusses the real time dispatch of ancillary services

supply security and short run capacity markets for electricity the creation of electricity markets has raised the fundamental question as to whether markets create the right incentives for the provision of the reserves needed to maintain supply security in the short run or whether some form of regulation is required in some states in the us electricity distributors have been made responsible for providing such reserves by contracting capacity in excess of their forecasted peak demand the so called installed capacity markets provide one means of contracting reserves and are the subject of this paper under monopoly as well as under perfect competition we identify firms short run opportunity costs of committing resources in the capacity market and the costs of inducing full capacity commitment the long run investment problem is not considered from a welfare viewpoint we also compare the desirability of providing reserves either through capacity markets or through the demand side i e power curtailments at the optimum capacity obligations equal peak demand plus expected outages and the capacity deficiency rate which serves as a price cap is set at firms opportunity costs of providing full capacity commitment

a survey of frequency and voltage control ancillary services part i technical features this two part paper surveys the frequency and voltage control ancillary services in power systems from various parts of the world in this second part essential economic features that must be taken into account when designing markets for ancillary services are first discussed the methods adopted in eight different systems australia france germany great britain new zealand pjm spain and sweden for trading frequency and voltage control ancillary services are then compared lastly new indicators for comparing volumes and costs of ancillary services across systems are proposed and calculated for the systems included in this survey the companion paper surveys the technical features of these ancillary services

optimal operation of a chp plant participating in the german electricity balancing and day ahead spot market abstract during the last years operators of combined heat and power chp plants are challenged by changing circumstances in the electricity markets while ensuring a stable heat and power supply for customers chp plant operators seek to maximise the profitability of the chp plant operation we propose a comprehensive concept and illustrate its potential for increasing the profitability when operating a chp plant with heat storage by participating in multiple electricity markets for this purpose the structure of the decision making process consisting of bid submission market clearing and chp plant operation planning is represented a multistage stochastic mixed integer linear programming milp model is developed that simultaneously optimises the operation of the chp plant with heat storage and bidding in sequential electricity markets price uncertainty is captured by means of stochastic processes the proposed concept is applied to the real case of a municipal energy supply company that participates in the german day ahead spot and balancing market results of the case study illustrate how trading in sequential electricity markets can result in an increased profitability of the chp plant operation where additional revenues from trading offset higher generation costs furthermore we exemplify how the optimal operation of the chp plant and heat storage device are adjusted according to revenue potential in multiple electricity markets

real wages over the business cycle evidence from panel data one topic on which keynes did not disagree with classical economists was the cyclical behavior of real wages keynes 1936 as well as various classical writers predicted that real wages should move countercyclically quoting the general theory p 17 in general an increase in employment can only occur through the accompaniment of a decline in real wages thus i am not disputing this vital fact which the classical economists have rightly asserted as indefeasible this prediction is based on the premise of competition and a given short run capital stock increases in employment then correspond to more intensive use of capital and through diminishing product lower real wages for this reason evidence by dunlop 1938 and tarshis 1939 that real wages move procyclically was viewed as paradoxical both dunlop and tarshis based their findings on an observed positive correlation between real and money wages which given the procyclical movement of money wages implies a positive correlation between

energy and reserve market designs with explicit consideration to lost opportunity costs the primary goal of this work is to investigate the basic energy and reserve dispatch optimization cooptimization in the setting of a pool based market of particular interest is the modeling of lost opportunity cost introduced by reserve allocation the authors derive the marginal costs of energy and reserves under a variety of market designs they also analyze existence algorithm and multiplicity of optimal solutions the results of this study are used to support the reserve market design and implementation in iso new england control area

the welfare cost of nominal wage contracting we use a dynamic general equilibrium model to obtain quantitative estimates of the welfare cost of nominal wage contracting we find that the welfare cost of such contracts can vary quite a lot depending on the degree of indexation the size and persistence of monetary shocks and the contract length the size and persistence of technology shocks do not affect the welfare cost significantly the elasticity of labour supply is important for the welfare cost if the labour supply elasticity is small the welfare cost of nominal wage contracts can be substantial

staggered price setting translog preferences and endogenous persistence abstract this paper generates persistent real effects of a monetary disturbance in the context of staggered price setters the model combines two related and reinforcing features a translog demand structure and a particular input output production structure these features offer a rationale why a firm when computing its own optimal contract price is influenced by the prices set in other overlapping contracts practically the two features interact in a positive manner and provide a way to generate significant endogenous persistence

the sensitivity of consumption of oil products to price changes an econometric investigation abstract this paper presents a small econometric model of the supply and demand of motor spirit diesel fuel oil and other gas diesel oil by modelling at this level of disaggregation it is possible to identify the dynamic structure of each market and estimate own price and cross price elasticities

a dynamic putty semi putty model of aggregate energy demand energy conservation dominated the adjustments of the energy decade the present study develops further the aggregate analysis to revisit the question of energy flexibility within the context of a multi factor dynamic model the resulting model preserves various adding up constraints cross equation parameter restrictions and consistent indexes within an ad hoc stock adjustment dynamic process applications to data for the usa and japan confirm the estimates of large long run elasticities under the assumption of a slow adjustment process

an oligopolistic model of an integrated market for energy and spinning reserve in this paper a model for oligopolistic competition in electricity markets is presented most previous proposed models have been static and focused only on the energy market incentives for strategic behavior in contrast in this paper a multiperiod market for energy and spinning reserve sr is considered by including such factors the competition among participants is modeled with more realism competition in the energy market is modeled by means of conjectured supply functions while conjectured reserve price response functions are used to consider the generators ability to alter the sr prices the resulting equilibrium problem is modeled in terms of complementarity conditions based upon a complementarity model the opportunity cost between the energy and sr markets is derived for oligopolistic markets the proposed model is illustrated by a six node network using a dc approximation

pricing of reserves valuing system reserve capacity against spot prices in electricity markets this paper models the interdependencies between markets for secondary reserve capacity and spot electricity to derive the pricing of reserves under equilibrium conditions starting with the indifference condition between offering in both markets the reservation price is derived from the opportunity cost consideration and the unit commitment conditions in a fundamental interrelated market framework the reserve market examined compares widely to the german market for secondary reserves but the general approach may also be used to investigate other reserve markets the approach explores and formalizes the influence of reserve capacity on the spot market supply function a numerical solution procedure is provided to this non trivial case of market interaction the model is used to estimate the expected reservation price development over the last years in germany

effects of allocative inefficiency on resource allocation and energy substitution in pakistan s manufacturing empirical economists often ignore that firms may not minimise costs in the presence of allocative inefficiency assuming strict cost minimisation when actually cost is not minimum may produce biased parameter estimates and elasticities we consider a method for estimating effects of allocative inefficiency on resource allocation and factor substitution and apply it to data from pakistan s manufacturing results show strong evidence of allocative inefficiency leading to over utilization of raw material and capital viz a viz energy and labour and increasing cost of production of firms by 1 per annum computed elasticities diverge from their true values in the presence of allocative inefficiency

pricing energy and ancillary services in integrated market systems by an optimal power flow a detailed ac opf based formulation for procuring pricing and settling energy and ancillary service in simultaneous auctions by integrated market systems is presented the paper provides clear definitions of locational marginal prices for energy and ancillary service marginal prices in terms of lagrange multipliers the characteristics of the prices are analyzed especially when economic substitution among ancillary services is required the paper also evaluates the conditions under which opportunity costs are incurred to units that provide ancillary services it is particularly shown that the intuitive belief that the provision of regulation down service does not incur opportunity cost to the provider in general is not true

energy and reserve pricing in security and network constrained electricity markets this paper analyzes some unresolved pricing issues in security constrained electricity markets subject to transmission flow limits although the notion of separate reserve types as proposed by ferc can be precisely and unambiguously defined when transmission constraints are active the very existence of separate reserve prices and markets is open to question when the prices are based on marginal costs instead we submit here that the only products whose marginal costs can be separately and uniquely defined and calculated are those of energy and security at each node thus under marginal pricing at any given network bus all scheduled reserve types should be priced not at separate rates but at a common rate equal to the marginal cost of security at that bus furthermore we argue that nodal or area reserves cannot be prespecified but must be obtained as by products of the market clearing process simulations back up these conclusions

a near rational model of the business cycle with wage and price inertia this paper presents a model in which insignificantly suboptimal behavior causes aggregate demand shocks to have significant real effects the individual loss to agents with inertial price wage behavior is second order in terms of the parameter describing the shock while the effect on real economic variables is first order thus significant changes in business activity can be generated by anticipated money supply changes provided that some agents are willing to engage in nonmaximizing behavior which results in small losses

the wage price spiral this paper rehabilitates the old wage price spiral it shows that after an increase in aggregate demand the process of adjustment of nominal prices and nominal wages results from attempts by workers to maintain or increase their real wage and by firms to maintain or increase their markups of prices over wages under continuous price and wage setting the process of adjustment would be instantaneous under staggering of price and wage decisions the adjustment takes time the more inflexible real wages and markups are to shifts in demand the higher is the degree of price level inertia and the longer lasting are the effects of aggregate demand on output

valuation framework for large scale electricity storage in a case with wind curtailment this paper investigates the value of large scale applications of electricity storage in selected european power systems in the context of wind generation confronted with a grid bottleneck it analyzes the market value to 2030 of two storage technologies assuming the market situation projected for germany and france the analysis assesses the evolution of storage economics based on the net present value of cash flows sensitivities to market and regulatory drivers of value are assessed e g electricity price spreads ancillary services revenues wind curtailment and the level of carbon prices the paper concludes by suggesting possible ways to improve the competitiveness of electricity storage such as research and development and deployment programmes and changes to the design of power markets and regulatory arrangements to enable storage owners to better capture the benefits of storage such changes would allow electricity storage where economically viable to play a critical role in establishing a future sustainable european power system

the impact of affirmative action on labor demand a test of some implications of the le chatelier principle this paper presents an alternative approach to measuring the impact of affirmative action on firms affirmative action is modeled as a series of hiring quotas if the quotas are binding then a firm subject to affirmative action will operate with greater costs of production have less elastic demand for inputs and be less able to substitute between most inputs the results are consistent with the hypothesis that affirmative action regulations significantly constrain firms behavior own wage elasticities are less elastic and most inputs are less substitutable for constrained firms further affirmative action raises costs by 6 5 percent for firms subject to the program copyright 1992 by mit press

how well does the is lm model fit postwar u s data postwar u s time series for money interest rates prices and gnp are characterized by a multivariate process driven by four exogenous disturbances those disturbances are identified so that they can be interpreted as the four main sources of fluctuations found in the is lm phillips curve model money supply money demand is and aggregate supply shocks the dynamic properties of the estimated model are analyzed and shown to match most of the stylized predictions of the model the estimated decomposition is also used to measure the relative importance of each shock to interpret some macroeconomic episodes and to study sources of permanent shocks to nominal variables

monopolistic competition and the effects of aggregate demand how important is monopolistic competition to an understanding of the effects of aggregate demand on output we ask the question at three levels can monopolistic competition by itself explain why aggregate demand movements affect output can it together with other imperfections generate effects of aggregate demand in a way that perfect competition cannot if so can it give an accurate account of the response of the economy to aggregate demand movements the answers are no yes and yes

climate change policy market structure and carbon leakage abstract the 1997 kyoto protocol on climate change obliges the industrialized countries to initiate the international effort of abating anthropogenic greenhouse gas ghg emissions if such an initiative is to be taken the associated competitive effects may lead to significant relocation of developed countries energy intensive production this paper examines this issue i adopt an oligopolistic structure combined with increasing returns to scale production technologies to represent the strategic interaction among the firms producing energy intensive products this representation is then embedded within a multi regional computable general equilibrium model which in turn is used for quantifying these relocational effects the results suggest that significant relocation of energy intensive industries away from the oecd may occur depending on the type of market structure with leakage rates as high as 130 in which case ghg control policies in the industrialized countries actually lead to higher global emissions

wind power integration and power system flexibility an empirical analysis of extreme events in germany under the new negative price regime abstract in this article the flexibility of the german power market with respect to the integration of an increasing share of electricity from renewable energy sources was analysed flexibility limiting system components which cause negative prices are explained and illustrated for the german market the decision of the european energy exchange in leipzig to allow negative price bids is then explained the empirical data illustrate the flexibility of conventional generating capacities in germany from october 2008 to december 2009 of the 86 h of negative spot prices 19 h were significantly negative with prices of at least 100 mwh these extreme hours were analysed in greater detail by the examination of different system components thereby load wind power infeed and conventional generation by fuel type were observed as well as the market for negative tertiary reserve as indicators for market tightness although the market situations were found to be severe under the current conditions it could have been much worse in order to enable the market to clear at all times policy recommendations are provided and long run implications of an increasing res e share on the conventional generation capacity are discussed the article concludes with an outlook on additional power system flexibility options

the co2 abatement game costs incentives and the enforceability of a sub global coalition abstract this paper studies the economic incentives and the institutional issues governing the outcomes of a short term climate change policy package guided by the united nations framework convention on climate change and the berlin mandate initiatives game theoretic tools and the global trade environment interface are explored within a 26 region 13 commodity computable general equilibrium framework to characterize the incentives of oecd regions to comply with a non binding agreement in a carbon abatement coalition the results showed that in the absence of side payments the achievement of such a coalition might require the design of suitable trade instruments

staggered price setting staggered wage setting and business cycle persistence abstract staggered price setting and staggered wage setting are commonly viewed as similar mechanisms in generating persistent real effects of monetary shocks in this paper we distinguish the two mechanisms in a dynamic stochastic general equilibrium framework we show that although the dynamic price setting and wage setting equations are alike a key parameter governing persistence is linked to the underlying preferences and technologies in different ways with reasonable parameter values the staggered price mechanism by itself is incapable of while the staggered wage mechanism plays an important role in generating persistence

real wages and the business cycle the objectives of this review are threefold 1 to characterize the empirical literature on the cyclical behavior of real wages 2 to identify the sources of the differences in results across studies and 3 to enumerate key factors that determine the cyclicality of real wages given a host of measurement and methodological issues drawing firm conclusions is difficult but several generalizations can be made the estimated cyclicality of real wages depends crucially on the time period of analysis and the choice of whether to examine the production or the consumption wage composition effects play an important but complicated role as well

automatic cost optimal power balance control the article presents application of evolutionary algorithm for cost optimal dispatch of ancillary services in power transmission system of the czech republic the problem is formulated as a nonlinear optimization problem taking into account both continuous and discrete control variables the optimal setting of control variables such as schedule for activation of regulation reserves which minimizes the regulation energy costs while maintaining required control performance are determined via evolution algorithm the proposed control scheme is tested on historical data from the transmission system operator

efficient scoring rule in multipart procurement auctions for power systems reserve in this paper scoring rules are analyzed based on the german markets for procuring power system reserves for paying accepted offers the pay as bid settlement rule is applied each offer consists of a reserve capacity and two prices the capacity price is for holding the capacity in reserve and the energy price is for delivery in case of actual use a scoring rule is applied to value the two part price bids today this scoring rule is based on procuring the offers in the rank order of the capacity prices a first analysis of historic price data indicates efficiency problems due to this scoring rule this leads to proposing to value the two part price bids based on the ex post knowledge of the actual use of the procured reserves it is shown that in contrast to today s scoring rule this duration curve approach gives incentives to reveal the variable generation costs in the energy price bids

asymmetric substitutability between energy and capital evidence from the manufacturing sectors in 10 oecd countries abstract this paper investigates the substitutability between energy and capital in the manufacturing sectors of ten oecd countries since 1980 by applying a cost function approach that has been widely used to analyze industrial energy demand first we attempt to determine the source of the disagreement in the literature on the substitutability between energy and capital and reach a conclusion regarding the substitutability between energy and capital dividing energy and capital into sub inputs we analyze their substitutability the empirical results indicate that fuel tends to complement capital in most countries whereas electricity and capital are substitutes thus this study confirms that heterogeneity in energy sources is a primary component of the systematic variation in the substitutability between energy and capital second we examine asymmetric substitutability between energy and capital by estimating the morishima elasticity of substitution the estimates of the morishima elasticity of substitution demonstrate that the substitution of energy for capital has dominated the substitution of capital for energy this asymmetric substitutability is natural from the producer perspective because capital costs are much greater than energy costs in most countries these results imply that the adoption of energy saving technologies has not been induced in response to increased energy prices

energy elasticities under divisia and btu aggregation abstract this paper considers two methods of energy aggregation divisia and btu a dynamic demand model is used to study the response of energy use to price and income changes under these two aggregation schemes while the short run responses of energy use are found to be similar the long run response is greater under divisia than under btu aggregation especially in periods of marked changes in energy prices

harmonization of the european balancing power auction a game theoretical and empirical investigation abstract the shift towards renewable energies is accompanied by great volatility on the supply side demanding european wide instead of national balancing services for the integrated european procurement of balancing reserves the european commission proposes a multi attributive auction mechanism which is very similar to the current german auction the key difference however is a switch from pay as bid to uniform pricing we develop a game theoretical model of the current german and the future european balancing market design both market designs have desirable economic properties in their one shot version i e an efficient auction outcome and competitive prices we show that a switch to uniform pricing does not induce bidders to report their true costs in their bids but leads to underbidding we contrast the equilibrium outcomes with german market data and find a substantial discrepancy i e non competitive prices we provide a game theoretical grounded explanation that is based on the regular repetition of the auction combined with the invariant supplier side