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TERRA ECONOMICUS

ECONOMIC APPROACHES FOR IMPROVING ELECTRICITY MARKET

TERRA ECONOMICUS, , Vol. 16 (no. 2),

This paper focuses on the economic approaches that can be used for improving the functioning of the electricity markets. The combined production of electricity and heat at the combined heat and power (CHP) is the most profitable complex energy supply which ensures the minimum specific fuel consumption and forms the reserve of reduce of electricity tariffs. However, the obligatory participation of the CHP in the trade and economic relations of the wholesale electricity market led to a decrease in their heat load and functioning in low-economic modes with the gradual displacement of their production capacities into the zone of forced generation of electricity. In turn, the increased costs for electricity generation at CHP plants began to be shifted to heat, which caused a decrease in the efficiency of the centralized system of heat supply to consumers and triggered their transition to significantly less efficient low-capacity boiler houses, which caused a significant over-expenditure of fuel in the energy industry. Our paper proposes a structural and organizational solution to this problem, which consists in improving the model of the wholesale and retail electricity markets and the existing trade and economic relations of market entities. The key provision of the proposal is the return of the CHP from the wholesale energy market to the regional electricity markets, which will enable them to regain their positions as the main supplier of heat energy, create conditions for concluding direct contracts between consumers and local power plants, and develop competition in the retail market and build local generating capacities.


Keywords: economic modeling; electricity markets; competitiveness; energy tariffs; consumer demand

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Publisher: Southern Federal University
Founder: Southern Federal University
ISSN: 2073-6606