We are doing a project in the World Bank on power sector reform in developing countries. The major work in the past on this topic remains the one that was by John Besant-Jones at the World Bank in 2006: http://siteresources.worldbank.org/INTENERGY/Resources/Energy19.pdf
One of the issues that struck us is how little literature there is on the topic at least on the type of wholesale electricity market design. To put it bluntly - the answer to Besant-Jones's question on what have we learned on power sector reform remains "NOT MUCH" after 12 years! The topic is very important because developing countries have unique characteristics - poor institutional framework, limited exposure to markets in general, massively contracted generation, weak transmission and often double digit demand growth. Yet, every country wanting to do the reform seems to embark magically on an European or an American model.
The interesting question is therefore - is that by and large the right answer? Is there evidence one way or the other looking at the actual experience?
I will be very interested to hear views on this.
Deb,
I think it is very dependent on the coutry. How government controlled the whole system is? How much gen and demand they have? How other markets transparency is? And how they are really willing to go for the market.
Obviously almost allwant to be like Eu or US markets. What I think it would be good to have a staggered market design so bugs are identified and fixed. Overall I think type of capacity market would work for such countries.
How do you think?
@Nadali - Thank you. I agree with most of what you say. Indeed, the market design has to be adapted to the state of governance, institutional capacity and physical system. But this is hardly the norm. I don't know if a capacity market is essential but in markets with double-digit growth rate and/or high penetration of zero SRMC variable RE - it may work better than a pure energy-only market. Professor Hugh Rudnick has been leading the wholesale market design work and we will hopefully have the working papers out soon to get his views. It will be really good to see more discussions and thoughts like this on this forum.
Thanks for raising such a topical subject. Besides agreeing to all what is said , a more fundamental apriori is metering, scheduling deviation accounting etc call them hygiene factors, must be in place ....in India at intra state level SAMAST scheme is being pursued such that market design works, so is the case in all the SAARC countries....
Yes indeed - the basics need to covered well and SAMAST (http://www.forumofregulators.gov.in/data/whatsNew/SAMAST.pdf) covers these really well.
The market design issues (cost based or bid based, capacity or energy-only, administered capacity or capacity auction, gross or net, nodal or zonal, ancillary coptimized or not, FTR or not, etc) are well worth pondering. It is in fact not necessary that the options are just what I listed. India after all used a simple but elegant solution for frequency control for many years. South Korea put a break on its electricity market and adapted a cost-based pool to the Korean context that was originally meant to be a transition measure. Chile recently introduced a special auction mechanism to procure capacity incentivised generators with flexibility to earn a premium - it is based on basic dispatch fundamentals and is simple to implement, but it did the trick and gave the utility exactly what it needed at a lower cost (without needing a complex capacity market). So I wonder if there are lessons like these that illustrate unique design features in developing countries.
Deb Chattopadhyay I want to research in Electricity market design for a PhD study and will need your help on which areas to study when it comes to electricity market design in developing countries.
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