What are the challenges of giving correct price signal and incentive to long term investment in a liberalized power market?
Article from: OGEL Archive issue , in Electricity Law and Regulation
Summary
The application of marginal cost pricing in a competitive electricity market provides a framework, which is being tested mainly in developed countries and changed the business environment for investment. But up to date experience shows that pricing on market forces alone is vulnerable to market failures, causing excessive price volatility and leading to frequent government intervention. The situation could discourage new investment and form a threat to reliability. The problem will become more eminent as excessive reserve margin became lower in some countries, and ...