Alyzing the Effects of Fuel Price Reform on Electricity Industry’s Financial Balance, Employing a Simulation of the Function of the Market

Subject Areas : Financial Economics

jamshid Pajooyan ¹ ( Department of Economics, Science and Research Unit, Tehran. Iran )
Taymot mohammadi ² ( Faculty of Economics, Allameh Tabatabai University, Tehran. Iran )
Ali Asghar Ismail Nia ³ ( Department of Economics, Central Tehran Branch, Islamic Azad University, Tehran, Iran )
elham gaforiyan ⁴ ( Financial Group, Islamic Azad University, Tehran, Iran Science and Research Branch )

Received: 2022-12-30 Accepted : 2023-03-06 Published : 2023-03-21

Keywords: Q41, exchange rate, L94, Keywords: Simulation, wholesale Electricity Market, Base Availability Payment, Market Price Cap, Fuel Price, Internal Rate of Return JEL Classification: Q5,

Abstract :

  Abstract This article is devoted to the study of the impact of a reform in power plant fuel prices on the key variables of Iran's electricity market (average electricity price and the financial balance of the electricity industry). It is based on a simulation model. In this regard, we employed a model in which the presence or absence of competition in the electricity market is based on the amount of power plant storage factor that is available in every hour. The corresponding critical storage factor, which is based on actual operation, is also calculated. Due to a suppressed price cap and availability rate (that is even lower than what is necessary for sending optimal investment signals), the current price cap and availability rate is not a valid starting point for calculating the desired effects. Hence, before examining the effects of a price reform on the mentioned variables, the price cap and availability rates need to be adjusted to a level that can guarantee a minimum IRR for investors in this sector. According to calculations, in order to sending the necessary signals for investment, by assuming a fixed availability rate, it is necessary to increase the current price cap (nearly 417 Rials per kilowatt hour) to a new level (570 Rials per kilowatt hour). According to that, the average wholesale market price will increase from nearly 600 Rials per kilowatt hour to 706 Rials per kilowatt hour. The implementation of this policy imposes a financial burden of about 29894 billion Rials to the Ministry of Energy. Given that, in markets amid with a price cap (and hence an availability payment), a price reform in fuel price, requires a proportional modification in the market price cap. Based on this obligation, the effects of the price reform on the mentioned variables, is calculated and analyzed. The analysis is based on three different scenarios about fuel price for power plants; The price of gas used in the petrochemical industry (as a raw material for this industry), the price of gas that is exported to Turkey, and, the minimum bound foreseen in the "law on the targeting of subsidies" in relation to the price of natural gas. Implementation of the mentioned scenarios will increase the market cap from 570 Rials per kilowatt hour to 1783, 3655 and 2830 Rials per kilowatt hour respectively. Adjusted average market price, proportional to the adjustment made in the market price cap, would be equivalent to 1922, 3801 and 2973 rials per kilowatt hour respectively. Furthermore, the financial burden corresponding to these scenarios will be 61717, 156574 and 114866 billion Rials respectively.

References:

فهرست منابع

• ابونوری و همکاران، تأثیر تشکیل بازار برق بر کارایی نیروگاههای برق، نشریه علمی و پژوهشی کیفیت و بهره وری صنعت برق ایران، سال دوم، شماره سوم، بهار و تابستان 1393


• اتباعی، فرامرز، بررسی مقایسه ای حراج مبتنی بر تبعیض قیمت و حراج مبتنی بر قیمت یکتا در بازارهای برق، پایان نامه دکتری، 1393


• اسماعیل نیا و شاهگلدی، بررسی اثرات افزایش قیمت سوخت نیروگاهی و نرخ ارز در بازار عمده فروشی برق ایران، فصل نامه مطالعات اقتصاد انرژی، سال دوازدهم، شماره 50، پاییز 95، صفحات 193-157


• آمار تفصیلی صنعت برق ایران، توانیر، ویژه تولید درسال 1393


• پژویان، جمشید، محمدی، تیمور، قیمت گذاری بهینه برای صنعت برق، (1379)، پژوهش های اقتصادی ایران، سال6، شماره3، صفحات 39-62.


• ترازنامه انرژی، 1392، وزارت نیرو.


• حیدری، کیومرث، ساختار قیمت گذاری و شیوه تدوین نرخ پایه آمادگی و انرژی در بازار برق ایران، وزارت نیرو، دفتر تنظیم مقررات (1376).


• سجودی و همکاران، مقایسه کارایی فنی نیروگاههای حرارتی کشور و بررسی عوامل مؤثر بر آن، کاربرد روش تصادفی ناپارامتریک پوشش داده ها، تحقیقات اقتصادی، دوره 49، شماره 1، بهار 1393


• منظور، داود، رضایی، حسین، اثرات اصلاح قیمت سوخت مصرفی نیروگاه ها بر قیمت برق در بازار تجدیدساختاریافته، (1391)، فصلنامه علمی پژوهشی برنامه ریزی و بودجه، شماره 1 صفحات 95-108


• منظور، داود، رضایی، حسین، ﺑﺮرﺳﯽ اثر اﺻﻼح ﻗﯿﻤﺖ ﺳﻮﺧﺖ ﻣﺼﺮﻓﯽ ﻧﯿﺮوﮔﺎ هﻫﺎ ﺑﺮ ﻣﯿﺰان ﻇﺮﻓﯿﺖ ﺳﺎزی و ﺗﻮﻟﯿﺪ ﺑﺮق در ﮐﺸﻮر: روﯾﮑﺮد ﭘﻮﯾﺎﯾﯽ ﺳﯿﺴﺘﻤﯽ، (1391)، ﻓﺼﻠﻨﺎﻣﻪ ﭘﮋوﻫﺶﻫﺎ و ﺳﯿﺎﺳﺖﻫﺎی اﻗﺘﺼﺎدی ﺳﺎل ﺑﯿﺴﺘﻢ، ﺷﻤﺎره 64، زﻣﺴﺘﺎن 1391، ﺻﻔﺤﺎت 25 – 46


• منظور، داود، صفاکیش، امیر کاظم، پیش بینی قیمت برق در بازار برق رقابتی ایران با رویکرد مدلهای سری زمانی، هفتمین همایش ملی انرژی، 1388

وب سایت شرکت مدیریت شبکه برق ایران، گزارش ها، گزارشات سالانه، صورتحساب های قطعی بازار برق 

• Botterud, a long-term planning in restructured power systems dynamic modeling, of investments in new power generation under uncertainty. Ph.D. Dissertation .Norwegian University of Science and Technology (NTNU). 27- 47 2002.


• BP Statistical Review of World Energy edition 64th, June 2015.


• Cramton, P.; Auction Design and Strategy Principles and Practice; Market Design Inc., University of Maryland.


• Dahlan, 2011, Valuation model for generation investment in liberalized electricity market, a thesis submitted to The University of Manchester for the degree of Doctor of Philosophy.


• De Vries, Heijnen, 2008, the impact of electricity market design upon investment under uncertainty: The effectiveness of capacity mechanisms. Utilities Policy 16, 215-227


• FEDERICO, G., and RAHMAN, D., Bidding in an Electricity Pay-as-Bid Auction, Journal of Regulatory Economics, vol. 24:2, pp. 175-211, 2003.


• Fereidoon P. Sioshansi, Competitive Electricity Markets: Design, Implementation, Performance, 2008.


• Glachant, 2006, Generation technology mix in competitive electricity markets. A contribution in “Competitive Electricity Markets and Sustainability”, edited by François Leveque.


• Khalili Araghi.M, Barkhordari.S, An evaluation of the welfare effects of reducing energy subsides in Iran, Energy Policy, 398–404, 2012.


• Olsina et al. 2006, Modeling long term dynamics of electricity markets, energy policy 34, 1411-1433


• OPEC, Annual Statistical Bulletin, 50th edition, 2015.


• OPEC, Monthly Oil Market Report, 2015.


• Stoft, »Power System Economics, Designing Markets for Electricity«, IEEE Press, 2002.


• G and kirschen.D fundamentals of power system economics, 2004.


• Vogstad, K, System dynamics analysis of the Nordic electricity market: The Transition from fossil fuelled towards a renewable supply within a liberalized electricity market. The Norwegian University of Science and Technology (NTNU). 1- 156،