A Simulation Study of Pricing for Electricity Spot Market in Taiwan (in Chinese)

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Taiwan has held the policy of power market deregulation in the reform agenda for more than 10 years. The latest version of the deregulation policy was prescribed by the draft of the Electricity Act amendment which was submitted by Energy Bureau on 13 October, 2005. The amendment deregulates the industry by opening the entry of generation, transmission and distribution business. Independent system operator will be established for the operation of power system and electricity markets. The objectives of the deregulation policy are to enhance the competitiveness of the industry as well as to attract the private investment. The final goal is to keep with the world trend of deregulation and to build a fair and just competitive power market so that the resource allocation of power industry can be more efficient. Traditionally, the industry has been regulated and monopolized by a vertically integrated Taipower Company. Rate of return method has been used to the electricity tariff structure. Cross subsidy was evident to the different type of customers in different time and location. This has resulted in resource misallocation and economic inefficiency. After deregulation, this pricing method ought to be changed and should obey the law of market mechanism which is driven by the supply and demand forces so that the distortion of price signal and inefficiency can be reduced. This paper is intended to study the market clearing price of the electricity spot market under deregulation in Taiwan. Firstly, we analysed the deregulation policy of Taiwan electricity supply industry. Secondly, we reviewed the pricing methods of electricity spot market adopted by other jurisdictions with the successful experience in power market operation. In light of the review we applied the approach of market clearing pricing to the case of Taiwan to explore the extent of electricity spot price variations. Finally, the results and discussions were presented. It is our hope that the paper with its findings can contribute to the successful reform of deregulating the electricity supply industry in Taiwan.

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