Economic Modeling of Regional Integration in Electricity Markets of Member Countries in Selected Economic Cooperation Organization (ECO): Application of System Dynamics Approach

Due to the increasing growth rate of electricity demand as well as relevant supply challenges, the economic issues of power systems have been considered by governments and energy experts to achieve further efficient resources allocation. Based on an approach of a dynamic system, the aim of this study has been to modelling the regional integration of electricity markets among the selected ECO member countries (including Iran, Turkey, Azerbaijan, Pakistan and Afghanistan) in order to maximize the stability of electricity supply. Accordingly, the required data have been applied during the period of 1980-2019. In this respect, two scenarios, namely a scenario of self-sufficiency of electricity (implying national electricity market) and a scenario of free regional market (implying regional integration market) have been conducted respectively, by specifying and estimating a Structural time series model, to simulate the trade flows of electricity in the selected ECO country members by 2030. The simulated results have indicated that Iran has had the marginal storage of more than one and the lowest price among the countries, while it has the largest volumes of electricity exports. Afghanistan with the marginal storage of less than one among the regional countries has had the lowest volumes of electricity Imports. In addition, the empirical results have revealed the fact that the electricity price has been decreasing as a result of a decrease in the electricity production costs. Consequently, the paper findings imply that uncertainty in the electricity supply can be reduced through implementing an integrated regional electricity market among the ECO members.