Evaluation methods in competitive bidding for electric power
Private suppliers of electricity that participate in competitive auctions must specify a multi-year price trajectory. It may be desirable for some bidders to propose prices that exceed the buyer's estimate of value in the short run, but still offer substantial long run benefits. Prices of this kind are called front loaded.'' From the buyer's perspective, bids which are front loaded are somewhat undesirable. They impose upon the buyer the risk that the long run benefits will not materialize if the supplier terminates delivery pre-maturely. In this appendix, we develop a model to evaluate front-loaded bids, which we call the implicit loan (IL) method. In this model, we view front-loading to be a loan from buyer to seller. This notion, which has been suggested informally in the past, is formalized and made the basis for an explicit analytic evaluation method.
- Research Organization:
- Lawrence Berkeley Lab., CA (USA)
- Sponsoring Organization:
- DOE/FE
- DOE Contract Number:
- AC03-76SF00098
- OSTI ID:
- 5380131
- Report Number(s):
- LBL-27450; ON: DE90003298
- Country of Publication:
- United States
- Language:
- English
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