Flexibility in Electricity Markets
The project consists of two parts. Part I: Consumption and demand of electricity must be balanced at all times. Achieving this balance requires a high degree of flexibility, either on the supply side, on the demand side or both. Achieving the warranted flexibility has become more challenging with the increased share of intermittent and distributed generation. A fundamental question is whether this requires new ways of organizing and governing the electricity market, including the availability of contracts and market places to allow market participants, as well as system operators and other decision makers, to operate efficiently. In this project we aim to study such questions.
Part II: This project starts from the observation that, in Norway and Sweden, the pricing of electricity may vary between geographical areas of the countries reflecting the capacity of transmission capacities, i.e. areas with pressure on transmission capacities will have a higher price than areas with a lower or no pressure on capacities. Economists have advocated much smaller geographical areas, namely production and consumption nodes. Theoretical models of production- and consumption nodes have indicated a welfare gain of having node-specific prices The purpose of the study is to establish the theoretical framework for analyzing optimal electricity pricing and to explore ideas how to implement such a system.