Competitive Electricity Markets: Theoretical Approaches and Formation Models

The article presents theoretical approaches to formation of a competitive electricity market: centralized and decentralized ones, making a choice between which depends on the degree of balance of physical and commercial electricity flows in the energy system, which determines the features of market modeling. Regardless of the approach, the modeling of a competitive electricity market is based on justifying its 7 key determinants including geographical delimitation, dispatch method, market infrastructure, time scaling, forms of trade, pricing methods, and product diversification. There is conflicting experience in the world concerning a competitive electricity market and no universal model of it. The analyzed models of the EU, USA and Australia show their significant differences. The decentralized approach was applied in the EU and a four-segment model of a competitive electricity market with zonal delimitation of energy systems was created. In the USA and Australia, the centralized approach with nodal delimitation of energy systems was used, and two- and one-segment models were created, respectively. The models of a competitive electricity market presented in the article also differ in dispatch methods, forms of trade, and products. Their only common characteristic is the orientation towards marginal pricing, although in each of the models it has specific features. Ukraine has formed a quasi-competitive electricity market using the European model. The correction of flaws of this model should be made with regard to the characteristics of the national energy system and the successful experience in liberalizing the electricity markets of other countries of the world, not just that of the EU.