Electricity markets and their Electricity markets and their key key players players Rudi Hakvoort Rudi Hakvoort
Learning objectives • To describe the electricity market • To explain how the market price is determined in an electricity market
Key players What defines how many products are produced and how many products are sold or consumed ? Consumers Producers Demand Curve Supply Curve
Consumers Consumer demand is indicated by the concept of ‘ willingness- to-pay ’ for their product. Consumers buy a product whenever their willingness to pay is higher than the price
Demand Curve PRICE P * QUANTITY Q * 5
Producer Producer behaviour depends on: • Production costs • Number of companies competing in the market Producers sell a product when their production costs are lower than the price
Supply Curve PRICE GENERATION CAPACITY
Supply and demand Demand PRICE curve Market clearing price Supply curve GENERATION Market clearing CAPACITY volume
Market clearing The price paid by P consumers is lower than their willingness-to-pay. The price received by producers is higher than the production costs. Q
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