Generation revenue assessment in pool-based electricity markets

Abstract

The success of privatization of airline and telecommunication industries has inspired the electricity industry to undergo deregulation and restructuring toward becoming a more transparent and competitive electricity market environment. The pool market model is one of the most preferred electricity market model implemented in many developing countries. Despite being the reasonable and safe option for a more competitive and transparent electricity supply industry, there are issues on the welfare of the generators involved. This paper addresses the pricing issue in pool market by extending the capacity payment mechanism in the single electricity market. In our proposed market model, clustering capacity price approach is introduced in the capacity payment mechanism to provide more significant generation revenue for generator. A case study is used to illustrate the proposed model. An economic analysis is performed to highlight the merits of the proposed model with both pure pool and single electricity market models in terms of generators generation revenue.