Optimal backup and supplemental power contract strategies in electricity markets

TL;DRAbstract

We have recently experienced historic changes in the electric power industry of the United States and almost all over the world. Deregulation and market competition are being touted as the main wheels to drive these changes to the frontiers of efficiency and new services. An extremely important, and under-researched, area for both suppliers and consumers in the new power markets is backup power contracting. Backup power is important because an essential attribute of electric power is its steady continuous availability, i.e., its reliability. In the good old days of regulated, vertically integrated firms, the local distribution company had to face the full challenges of assuring reliability for all customers in the local distribution franchise area. Indeed, the newest wave of deregulation, so-called Distributed Generation (DG), calls for groups of retail customers, perhaps a shopping mall or a group of co-located businesses, to install their own generators. Distributed Generation and tr

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