Developing a Decision Support System for Generation Expansion Policy Making in Iranian Deregulated Electricity Market

Ebrahimi Takalloo, Maziar | 2009

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  1. Type of Document: M.Sc. Thesis
  2. Language: Farsi
  3. Document No: 39636 (44)
  4. University: Sharif University of Technology
  5. Department: Management and Economics
  6. Advisor(s): Kermanshah, Ali; Bahramgiri, Mohsen
  7. Abstract:
  8. Iranian Power industry has undergone fundamental changes since deregulation started in 2003. Currently, bulk trade of electricity in the industry is mainly conducted through a day ahead wholesale market, representing over 98 percent of the exchange of electricity within the grid. Although the current market regime is under operation for over 4 years, several political, cultural and operational obstacles have hindered effective evolution of the restructuring process. Low political support from privatization of the industry assets backed by lack of confidence and trust in market economies in general, and low economic incentive of the market players has slowed down formation of an effective market mechanism for electricity trade. On the other hand, high level of cultural inertia towards releasing "sources of power" of government organization's managers as well as high market concentration and high level of regulatory risks, have decreased investors confidence to enter this sector. Lack of coherence between policy making groups, market regulatory authorities, market operator, system operator and provincial electricity companies has also decreased sound movement of the vertically integrated industry towards restructuring goals. However, efficient or not, Iranian power industry is moving towards market based trade of the electricity and once imperative operation and planning of the industry will leave its place for market economy. Currently, once centrally owned and controlled power system is no longer operated by the sole player of Ministry of Energy, letting the independent power producers invest in power system generation facilities and connect to the network to sell their produced electricity to the market. In the new agreements, short term operation and long term planning of the industry is no longer the result of decision makings by the central coordinator, but the result of complex inter-related decisions of several market and industry players. Introduction of electricity market reflects the need for proper and continuous monitoring and policy making by the regulator to ensure short term stability as well as long term well functioning of the proposed market structure, rules and bylaws. It is worth mentioning that one of the main challenges of advocates of restructuring efforts around the world is pre-proofing fair and just electricity prices as well as adequate and continuous investments in the industry. Witnessing non stable electricity prices and over investments, or worse investment scarcities in some power markets have occasionally posed political risks to restructuring efforts in power systems in many countries. It is clear that long term sustainability of a power system depends on proper level and type of investments in generation technologies. However, in the new structure, investment decisions are not the role of the central planner, but the result of decentralized and complex investment decisions of the private sector. In this context, the regulatory body can ensure proper investments by continuous monitoring of the industry players and tracking the trends of investments in the generation technologies of the industry. In this context, utilizing reliable modeling and simulating softwares can enhance decision makings of the regulator and support its dynamic policy making efforts. Decision Support Systems (DSS), by mapping the decision policies of different industry players and simulating complex relations within the industry, can provide cheap and fast tools and reliable playgrounds for the policy makers to test their decision policies and bylaws prior to submission. On the other hand such tools will enable industry managers and investors to forecast business cycles of the industry and make forth appropriate strategic decisions. In this research, a Decision Support System has been proposed for policy analysis in the Iranian Power Industry using System Dynamic approach. The proposed software includes modeling trend of demand in the Iranian Electricity Grid, modeling current installed generation technologies and their behavior in the market, modeling electricity market as the price extraction mechanism, and modeling investments in 6 types of generation technologies (Steam, Gas, CCGT, Wind, Hydro, and Diesel). The developed software allows the user to study effects of several regulatory policy making decisions over defined time span of interest.
  9. Keywords:
  10. Privatization ; Policy Making ; Investment ; Energy Market ; Decision Making Support System ; Power System Restructuring ; Deregulation ; Iran Power Industry

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