Long term energy efficiency trading as an approach for the competition improvement in the electricity markets

Abstract

This paper presents a novel approach for long-term energy efficiency trading as a new tool for market competition improvement and market power reduction. The proposed method is a demand side solution and an alternative method for demand side management (DSM) promotion in electricity market, especially where load possesses considerable potential of conservation. By designing a new trading commodity, social welfare improvement and energy efficiency promotion can be obtained. A comprehensive long-term market simulation method considering hydrothermal combination and bilateral contracts is used for showing the energy efficiency trading effects. For measuring the market power a Lerner Index based indicator is used. The proposed method is tested on IEEE RTS system and the results are presented. The results confirm the ability of the proposed method in limiting the long-term market power and consequently lowering the electricity price.