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Research at UCL Australia

UCL School of Energy and Resources

Research in the School of Energy and Resources focuses on both the upstream and downstream development of energy and resources, covering a wide range of disciplines - from engineering and economics to environmental science and law. 

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Mullard Space Science Laboratory

The Mullard Space Science Laboratory (MSSL) is a world-leading research organisation delivering a broad science programme that is underpinned by a strong capability in space science instrumentation, space-domain engineering, space medicine, systems engineering and project management.

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International Energy Policy Institute

The International Energy Policy Institute (IEPI) was created to address key policy issues in the mineral, energy and resources industries through intensive and innovative research.

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2014 Annual Report

2014 Annual Report cover

Read about all departmental research in the 2014 Annual Report.

Impact of Reserve Margin Variance on Investment Encouragement and Competition for Creating Price Efficiency: Case of the Java-Bali Electricity System

Ira Savitri

Ira Savitri (B.Eng)

Project submitted in partial fulfilment of the requirements for the degree of MSc (Energy and Resources), UCL Australia.


The restructure of the Indonesia electricity market system aims to achieve price efficiency and encourage new investment.  However, these two intentions are contradictory with regard to spare capacity, also known as the reserve margin level in the system. 

This research examined an optimum reserve margin of the Java-Bali prospective competitive market with energy-only and spot-price system, by simulations using PLEXOS® software. 

Intense competition in a high reserve margin condition increases price efficiency but reduces incentives for investors.  In an energy-only market, these incentives are required to compensate investment cost that is not guaranteed.  Failure to obtain them might discourage new investments.  Conversely, a low reserve margin condition enables investors to control market prices that can lead to price inefficiency.  Hence, an ‘optimum’ reserve margin is sought that establishes a balanced condition that creates price efficiency and encourages investment.

The simulations yielded different levels of optimum reserve margin in perfect and imperfect competition conditions.  A sensitivity analysis on the results concerning the existence of market power demonstrates that high reserve margin does not necessarily improve price efficiency.  The research suggests the Java-Bali system could increase the reserve margin, consider changing generator technology and fuel used, or lessen market power.