A transition to bilateral trading ESI – effect to generation dispatched cost

Supattana Nirukkanaporn (Energy Field of Study, School of Environment, Resources and Development, Asian Institute of Technology,Pathumthani, Thailand)
S. Kumar (Energy Field of Study, School of Environment, Resources and Development, Asian Institute of Technology,Pathumthani, Thailand)

International Journal of Energy Sector Management

ISSN: 1750-6220

Publication date: 23 November 2010

Abstract

Purpose

The purpose of the paper is to analyze the effect on centralized dispatching generation cost under the condition where the single‐buyer electric supply industry (ESI) with independent power producer (IPP) scheme (the ESI structure that is widely implemented in developing countries) is opened for bilateral trading. The analysis is based on the Thai power system.

Design/methodology/approach

The analysis considers the average generation cost (B/kWh) derived from unit commitment of power generation under three cases – single‐buyer model with must‐run IPP scheme, unconstrained operation case, and the case where bilateral trading is introduced. The analysis is performed for different demand levels.

Findings

The results indicate that the operational constraint from the virtual must‐run power purchase agreement under IPP scheme leads to higher generation cost. The choice of allowing IPP to trade through bilateral trading and removal of the must‐run contract shows potential to lessen the operational constraint and lower generation cost can be achieved under some conditions – depending on the plant type and the share of bilateral market in the system. The planning and policy should take into consideration these conditions especially during the transitional period of ESI reform.

Research limitations/implications

The main limitation of the analysis is the availability to recent data. The load factor of the demand curve is taken from the peak day of the year, resulting in higher load factor than the average of Thailand. With lower load factor, the must‐run constraints might be more obvious during the lighter load day and more expensive generation cost can be observed. However, the cases are compared at same demand curve. Therefore, the trend of result will lead to the same conclusion.

Originality/value

Uneconomic operation of the single‐buyer ESI with IPP scheme which has been implemented in many developing countries was clearly determined. The literature shows that the ESI operation can be more efficient when the sector moves towards higher degree of competition, either fully competitive market or bilateral trading. The potential for better operating conditions for bilateral trading has been suggested. The simulation based on the power system of Thailand can be an example for other developing countries operating under the similar ESI structure.

Keywords

Citation

Nirukkanaporn, S. and Kumar, S. (2010), "A transition to bilateral trading ESI – effect to generation dispatched cost", International Journal of Energy Sector Management, Vol. 4 No. 4, pp. 577-592. https://doi.org/10.1108/17506221011092788

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Publisher

:

Emerald Group Publishing Limited

Copyright © 2010, Emerald Group Publishing Limited

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