Electricity market structure & regulatory reforms on performance in electricity generation

Abstract

This study discusses the evolution of the Electricity Market. Firstly, the basic structure of electricity supply and demand is presented and then the architecture of the power market follows. We discuss analytically how monopolies and vertically connected markets deregulate and form other types of organizations. Features of each and every design and several examples from countries that implemented different structures are presented. The electricity market under an environmental perspective is considered and explained in a simple way, giving attention to how markets clear and how prices are imposed, and through, which mechanisms. We examine if and under which circumstances is there a preferable design, analyzing what the economic theory claims about optimal pricing and its implementation. During this process, is taken into consideration that the first-best solution scheme doesn’t recover the costs of the firm or the monopoly. Finally, we present an empirical analysis as far as it concern the electricity generation using various data associated with the issue under consideration. Panel data analysis is used in order to capture the differences between the different systems of organization in the market.