Demand side provision of peaking capacity and reserves in deregulated power systems

Abstract

Provision of peaking capacity in deregulated power systems is an unsolved issue. The paper shows that reserve margins have been declining in several countries. Some existing solutions are discussed, and placed in the broad context of the theory of peak load pricing from the economic literature. On a theoretical basis, the gains of utilizing demand side elasticity are shown. The ideas are illustrated with a description of the situation in the Norwegian market. Finally, some cost aspects of demand side instruments are discussed.