Pricing independent power production
by Aviel Verbruggen
International Journal of Global Energy Issues (IJGEI), Vol. 2, No. 1, 1990

Abstract: Pricing the electricity traded between independent power producers and the interconnected power grid is a main determinant of the future development of independent generation in a region. Because a kWh varies in value depending on place, time and reliability of its supply, only a full marginal cost pricing system offers a first-best solution. In the real world of average cost pricing, two-part tariffs and transaction costs, a clear catalogue of problems involved and equitable solutions is necessary. Empirical evidence shows that a consensus on general pricing principles is mostly attainable, but that implementation of the principles is a source of severe conflicts. By discussing the Belgian experience in this field, we hope to have contributed in clarifying the subject.

Online publication date: Sat, 19-Jul-2014

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