Partie 2 ou 3 Nouvelle conomie lectrique - Centre International de ...

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Partie 2 ou 3 Nouvelle conomie lectrique - Centre International de ...

- 9 -ordination, the acceptance by the regulator of quasi-vertical relations with regard to long-termcontracts or to integration between production and supply, and the tolerance of horizontalintegration and loose entente on spot price between dominant producers .We will present advantages and limits of these five solutions: the three types of publicgovernance for ensuring capacity adequacy at peak times and two solutions of privategovernances. Referring to the efficiency of the market instruments inspired by the PublicEconomics concerning instruments to promote the supply of a public good, we will use thecategorisation by Robert Wilson (1999) of the tariff solutions for network access (losses andcongestion) in Pigouvian and Coasian solutions. Then, referring to the transaction cost theorywhich is another valuable base of the antitrust doctrines (Joskow, 1995), we consider thepublic governance solution by centralized procurement of new capacities in view of capacityadequacy, then we analyse three private governance solutions: long-term contracts, verticalintegration and entente between dominant producers.2.1. The Pigouvian solution: adding a term of capacity to the hourly spot priceThe Pigouvian solution consists of adding an capacity payment to the marginal price of theenergy which is the hourly price defined on the spot market. This term is reckoned to reflectthe value of the marginal utility of the supply available at peak times, that is, the value of thesocial marginal cost of the supply failure. It would the value given by a fictitious marketwhere power supply and demand would interact normally during peaks and super-peaks, if thewillingness of consumers to pay for security of supply shows itself in additional payments forsupply or withdrawals if they consider prices too high.This market rule has three functions:- first, to encourage producers to declare their available capacities at peak times, asin the logic being sought they should be paid for declaring themselves as such evenif not called by the market administrator ;- second, to encourage investment in peak units and non-decommissioning of oldunits ;- and third, to ensure additional income for the new equipment intended for base orsemi-base load production, while at the same time contributing to the peak.This last concern, that of making the base-load equipment profitable, certainly exists eventhough main and direct justification is the need for capacity adequacy at peak times. It is morepronounced in developing countries, especially in those where the regulatory risk is higherand/or the markets are subject to significant price uncertainty because of particulartechnological constraints, especially the unknown factors in current hydroelectric production(Newbery, 2000).There are two methods to define the capacity payment. In the first method, formerly followedin Great Britain, the regulator chooses to define a fictitious value for the failure following asurvey of purchasers. He then chooses to carry out a sophisticated ex post calculation basedon the product of the VOLL (Value of the Loss of Load) and the probability of failureevaluated ex post according to the hourly supply-and-demand difference, using amathematical model. In the second method, more in line with a simplified approach of thePigouvian perspective on the social cost, it is possible to confine oneself to a cost-efficiencyprocess in which the marginal profit is not known. The value of the capacity term is definedincentives inv elec north south energy policy.doc created by Dominique Finon on 14/05/2004printed by JQ on 12/22/2004 at 11:43 9/31

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