Indivisibilities in investment and the role of a capacity market.

ABSTRACT: The topic of pricing non-convexities in power markets has been explored vividly in the literature and among practitioners for the past twenty years. The debate has been focused on indivisibilities in short-term auctions, the computational tractability of some pricing proposals, and the economic analysis of their behavior. In this paper, we analyse a source of non-convexities that is not discussed as broadly: the indivisibilities in investment decisions. The absence of equilibrium that we are primarily concerned about is the long-term equilibrium. We derive a capacity expansion model with indivisibilities and we highlight the issues arising from it. We discuss its relevance and address one particular argument for neglecting indivisibilities in investment, namely market size. We inves

SUBMITTER: Stevens N 

PROVIDER: S-EPMC11427516 | biostudies-literature | 2024

REPOSITORIES: biostudies-literature