Economics of Electricity Markets Competition and Rules 1st edition by Anna Cretì, Fulvio Fontini ISBN 1316952819 9781316952818

Part I: Introduction to Energy and Electricity

1. Basic Principles, Definitions and Unit Measures

   • 1.1 Introduction
   • 1.2 Basic Principles of Energy
   • 1.3 Primary Energy Sources and Energy Carriers
   • 1.4 Energy Units and Energy Measures

2. Introduction to Electricity: Brief History of the Power Industry

   • 2.1 Introduction
   • 2.2 Basic Principles of Electricity
   • 2.3 Brief History of the Commercial Development of Electricity
   • 2.4 Introduction to Power Generation Technologies and Costs

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Part II: The Basic Design of Electricity Systems and Markets
3. Electricity Systems and the Electricity Supply Chain

• 3.1 Introduction to Electricity Systems
  • 3.1.1 Power Plants
  • 3.1.2 Load
  • 3.1.3 Transmission and Distribution Networks
• 3.2 The Electricity Supply Chain
  • 3.2.1 Production
  • 3.2.2 Transmission
  • 3.2.3 Distribution
  • 3.2.4 Metering and Retailing
  • 3.2.5 Dispatching
• 3.3 Representing the ESC

4. The Four Market Designs of the Electricity System

   • 4.1 Introduction
   • 4.2 The Vertical Integrated Industry
   • 4.3 The Single Buyer Model
   • 4.4 The Wholesale Market
   • 4.5 The Wholesale and Retail Markets Model

5. Energy Products and the Time Dimension of Electricity Markets

   • 5.1 Introduction
   • 5.2 Energy, Ancillary Services and Generation Capacity
   • 5.3 The Time Structure of Electricity Markets
     • 5.3.1 Energy Markets
     • 5.3.2 Ancillary Services Markets
     • 5.3.3 Capacity Markets
   • 5.4 The Settlement Process

6. Some Principles of Electricity Sector Regulation

   • 6.1 Introduction
   • 6.2 Why Regulate the Electricity Sector?
   • 6.3 Pricing Natural Monopolies
   • 6.4 Electricity Tariffs and Bills

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Part III: Simplified Isolated Markets without Network Congestion
7. Load and Power Generation

• 7.1 Introduction
• 7.2 The Time Structure of Load
• 7.3 The Characteristics of Power Generation Costs

8. The Centralized Solution of Optimal Dispatching

   • 8.1 Introduction
   • 8.2 The Cost Minimization Problem with Two Power Plants
     • 8.2.1 Case I
     • 8.2.2 Case II
   • 8.3 The Cost Minimization Problem with n Plants
   • 8.4 The Welfare Maximization Problem with Several Consumers

9. Welfare Maximization with Time-Varying Load

   • 9.1 Introduction
   • 9.2 The Two-Hour Case
   • 9.3 The Case of T Hours
   • 9.4 Economic Dispatching
   • 9.5 Welfare Maximization with Capacity Constraint: Optimal Load Shedding

10. The Market Solution to Optimal Dispatching

• 10.1 Introduction
• 10.2 The Case of a Fixed Rigid Load
• 10.3 The Wholesale Market Case: Variable Load
• 10.4 Market Equilibria and Welfare Maximization
• 10.5 Market Equilibria in Different Hours

11. Balancing Markets

• 11.1 Introduction
• 11.2 Positive and Negative Imbalances
• 11.3 The Welfare Effects of Imbalances
• 11.4 The Coexistence of Day-Ahead and Real-Time Markets
• 11.5 The Double Settlement
• 11.6 A Centralized Imbalance Market

Appendix to Part III: A Market Game of the Wholesale Electricity Market

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Part IV: Competition in Wholesale Electricity Markets
12. Wholesale Market Competition

• 12.1 Introduction
• 12.2 Classification of Models
  • 12.2.1 Optimization Models
  • 12.2.2 Equilibrium Models
  • 12.2.3 Simulation Models
• 12.3 Three Models of Market Power in Electricity Markets
  • 12.3.1 Cournot Competition
  • 12.3.2 Supply Function Equilibria
• 12.4 Auctions
  • 12.4.1 Uniform Auctions and Market Power

13. Market Power in Electricity Markets

• 13.1 Introduction
• 13.2 Physical Withholding to Exert Market Power
• 13.3 Economic Withholding and Transmission Constraints
• 13.4 Detecting and Measuring Market Power
  • 13.4.1 Measures of Concentration
  • 13.4.2 Measures of Market Power
  • 13.4.3 Inferring Market Power by Bids

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Part V: Introducing Transmission Networks: Network Congestion and Electricity Import-Export
14. Electricity Transmission: Basic Principles

• 14.1 Introduction
• 14.2 Optimal Dispatching with Transmission Constraints and Nodal Prices
  • 14.2.1 Case 1: A Single Power Plant
  • 14.2.2 Case 2: Asymmetric Plants, Located at Different Nodes
• 14.3 Transmission Constraints and Line Losses
• 14.4 Optimal Dispatching and Nodal Pricing with Losses

15. Meshed Networks and Congestion

• 15.1 Introduction
• 15.2 From Two-Nodes to Three-Nodes Systems
• 15.3 Nodal Prices in Three-Nodes Networks
• 15.4 Transmission Congestion and Loop Flows: Some Examples

16. Transmission Pricing in Practice

• 16.1 Introduction
• 16.2 Network Pricing Classification
  • 16.2.1 Postage Stamps
  • 16.2.2 Zonal Prices
• 16.3 Distributional Issues with Network Pricing
• 16.4 Transmission Pricing: Some Experiences
  • 16.4.1 Transmission Pricing in the United States
  • 16.4.2 Zonal Pricing in Practice

17. From Nodal Prices to Transmission Capacity Expansion

• 17.1 Introduction
• 17.2 Interconnections and Net Export Curves
• 17.3 Welfare Analysis in the Absence of Interconnection Costs
• 17.4 Optimal Transmission Investment with Investment Costs
• 17.5 Transmission Capacity Expansion and Market Failures

18. Transmission Rights and Price Risk Hedging

• 18.1 Introduction
• 18.2 Physical and Financial Transmission Rights
• 18.3 Value Equivalence of PTRs and FTRs
• 18.4 Transmission Rights and Risk Hedging
• 18.5 Measuring Transmission Capacity

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Part VI: Economics of Electricity Retail Markets
19. Retail Competition: Supplying Electricity to Final Consumers

• 19.1 Introduction
• 19.2 Real-Time Pricing under Competitive Retail Markets
• 19.3 Retail Competition and (In)efficiency of Real-Time Pricing
• 19.4 Retail Competition in the Borenstein and Holland (2005) Model: Specific Issues
  • 19.4.1 Second-Best Pricing
  • 19.4.2 Fraction of Consumers on Real-Time Prices
  • 19.4.3 Welfare Gains
  • 19.4.4 Endogenous Consumers’ Switching
  • 19.4.5 Long-Run Effects of Retail Competition
  • 19.4.6 Empirical Evidence on RTP
• 19.5 RTP versus Two-Part Tariffs
• 19.6 Real-Time Pricing in Practice

20. Assessing the Benefits of Retail Competition

• 20.1 Introduction
• 20.2 Benefits from Retail Competition
  • 20.2.1 Efficiency
  • 20.2.2 Pricing
  • 20.2.3 Differentiation and Equipment Innovation
• 20.3 Competition with Market Imperfections
  • 20.3.1 Switching Costs
  • 20.3.2 Informational Complexities
  • 20.3.3 Consumer Inertia
  • 20.3.4 Customer Segmentation
  • 20.3.5 Innovative Processes
• 20.4 Equity Concerns in Competitive Retail Markets

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Part VII: Investing in Power Generation
21. Optimal Investment in Power Generation

• 21.1 Introduction
• 21.2 The Optimal Investment Problem with a Single Technology
• 21.3 The Cost Minimization Problem
• 21.4 The Competitive Solution to Optimal Investment

22. Energy-Only Markets vs. Markets with Capacity Remuneration Mechanisms

• 22.1 Introduction
• 22.2 Generation Adequacy in Practice
  • 22.2.1 The Existence of Markets for Hedging Risks
  • 22.2.2 Market Power
  • 22.2.3 Lack of Coordination and Asymmetric Information
• 22.3 Electricity-Only Markets and Capacity Remuneration Mechanisms
  • 22.3.1 Insufficient Capacity Due to Price Caps
  • 22.3.2 Insufficient Capacity Due to Extra Costs

23. Analysis of Capacity Remuneration Mechanisms

• 23.1 Introduction
• 23.2 Classifications of CRMs
• 23.3 Typologies of CRMs
  • 23.3.1 Capacity Payments (CP)
  • 23.3.2 Capacity Auctions (CA)
  • 23.3.3 Capacity Obligations (CO)
  • 23.3.4 Strategic Reserves (SR)
  • 23.3.5 Reliability Options (RO)
• 23.4 Operating Reserve Demand Curve

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Part VIII: Environmental Challenges and the Future of Electricity Markets
24. Global Warming and the Electricity Markets

• 24.1 Introduction
• 24.2 Decarbonization of Electricity Production
• 24.3 RES and Energy Markets after the Paris Agreement
• 24.4 The Impact of Climate Change on Electricity Demand and Supply
• 24.5 The Impact of CO2 Prices on Electricity Markets

25. Renewable Energy Sources and Electricity Production

• 25.1 Introduction
• 25.2 The Reasons for Choosing Renewables
• 25.3 The Levelized Cost of Energy
• 25.4 RES Support Policies
  • 25.4.1 Price-Based Policies
  • 25.4.2 Quantity-Based Policies

26. The Integration of Renewable Energy Sources in the Electricity System

• 26.1 Introduction
• 26.2 Variable Energy Resources: Some Stylized Facts
• 26.3 Integration Costs
• 26.4 The Impact of VER on the System Marginal Price

27. Smart Grids

• 27.1 Introduction
• 27.2 Defining Smart Grids
  • 27.2.1 Generation
  • 27.2.2 Transmission
  • 27.2.3 Distribution
  • 27.2.4 Supply
• 27.3 Economic and Environmental Benefits of Smart Grids
• 27.4 The Deployment of Smart Grids

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References
Index