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Electricity markets are designed to provide reliable electricity at least cost to consumers. This paper describes how the best designs satisfy the twin goals of short-run efficiency-making the best use of existing resources-and long-run efficiency-promoting efficient investment in new resources. The core elements are a day-ahead market for optimal scheduling of resources and a real-time market for security-constrained economic dispatch. Resources directly offer to produce per their underlying economics and then the system operator centrally optimizes all resources to maximize social welfare. Locational marginal prices, reflecting the marginal value of energy at each time and location, are used in settlement. This spot market provides the basis for forward contracting, which enables participants to manage risk and improves bidding incentives in the spot market. There are important differences in electricity markets around the world, reflecting different economic and political settings. Electricity markets are undergoing a transformation as the resource mix transitions from fossil fuels to renewables. The main renewables, wind and solar, are intermittent, have zero marginal cost, and lack inertia. These challenges can be met with battery storage and improved demand response. However, good governance is needed to assure the market rules adapt to meet new challenges.

Most OECD countries, and many countries outside the OECD, are now deeply engaged in a reform of their electricity markets to stimulate competition and improve efficiency. This book considers the key elements of effective reform based on a review of experiences to date. A converging trend emerges, that emphasises competition in the generation, supply and trade of electricity, aimed at maximising consumer choice. It also highlights the development of new approaches to regulation of the transmission system, which remains monopolistic. This book is an invaluable guide and reference for energy policy makers. It examines the many issues and functions that define a modern, liberalised electricity supply industry, and the challenges posed by regulatory reform.

Published: 02 November 2017 Electricity markets are designed to provide reliable electricity at least cost to consumers. This paper describes how the best designs satisfy the twin goals of short-run efficiency-making the best use of existing resources-and long-run efficiency-promoting efficient investment in new resources. The core elements are a day-ahead market for optimal scheduling of resources and a real-time market for security-constrained economic dispatch. Resources directly offer to produce per their underlying economics and then the system operator centrally optimizes all resources to maximize social welfare. Locational marginal prices, reflecting the marginal value of energy at each time and location, are used in settlement. This spot market provides the basis for forward contracting, which enables participants to manage risk and improves bidding incentives in the spot market. There are important differences in electricity markets around the world, reflecting different economic and political settings. Electricity markets are undergoing a transformation as the resource mix transitions from fossil fuels to renewables. The main renewables, wind and solar, are intermittent, have zero marginal cost, and lack inertia. These challenges can be met with battery storage and improved demand response. However, good governance is needed to assure the market rules adapt to meet new challenges.

Published: 02 November 2017 ; Electricity markets are designed to provide reliable electricity at least cost to consumers. This paper describes how the best designs satisfy the twin goals of short-run efficiency-making the best use of existing resources-and long-run efficiency-promoting efficient investment in new resources. The core elements are a day-ahead market for optimal scheduling of resources and a real-time market for security-constrained economic dispatch. Resources directly offer to produce per their underlying economics and then the system operator centrally optimizes all resources to maximize social welfare. Locational marginal prices, reflecting the marginal value of energy at each time and location, are used in settlement. This spot market provides the basis for forward contracting, which enables participants to manage risk and improves bidding incentives in the spot market. There are important differences in electricity markets around the world, reflecting different economic and political settings. Electricity markets are undergoing a transformation as the resource mix transitions from fossil fuels to renewables. The main renewables, wind and solar, are intermittent, have zero marginal cost, and lack inertia. These challenges can be met with battery storage and improved demand response. However, good governance is needed to assure the market rules adapt to meet new challenges.

The recent OFGEM consultation on gas and electricity markets has been seen as radical and controversial because, in a context of security and sustainability objectives, it questions the effectiveness of the current market structures for the UK energy sector. In this it reaches a very similar set of conclusions to the October 2009 Committee on Climate Change Progress Report to Parliament on Meeting Carbon Budgets. This article concentrates on electricity and argues that, at least for the power sector, OFGEM's concern is well founded and should imply a radical reappraisal of market arrangements. This is especially important given the central role of the power sector in achieving targets for reduced CO2 emissions. If anything the OFGEM arguments for more radical reforms are understated. This paper seeks to: examine more critically the sources of the benefits, in lower costs and prices, that have accrued under the post 1990 market regimes; consider whether current trading and system operation structures would be technically consistent with the generation technologies likely to form part of the new low carbon energy economy; discuss the main market problems posed for securing the investment necessary to meet key objectives of adequate capacity and low carbon sustainability; argue that a central purchasing agency for the power sector could deliver the main policy objectives for the sector while retaining the most important features of competitive market structures.

Contents: Introduction to the handbook on electricity markets / Jean-Michel Glachant, Paul L. Joskow and Michael G. Pollitt -- Part I: Taking stock: the legacy -- 2. Strengths and weaknesses of traditional arrangements for electricity supply / Richard Schmalensee -- 3. Optimal wholesale pricing and investment in generation: The basics / Paul L. Joskow and Thomas-Olivier L.autier -- 4. Wholesale electricity market design / Frank A. Wolak -- 5. The evolution of competitive retail electricity markets / Stephen Littlechild -- 6. Strengths and weaknesses of the British market model / David Newbery -- 7. Strengths and weaknesses of the pjm market model / William W. Hogan -- 8. Ercot: Success (so far) and lessons learned / Ross Baldick, Shmuel S. Oren, Eric S. Schubert and Kenneth Anderson -- 9. Lessons from australia's national electricity market 1998-2018: Strengths and weaknesses of the reform experience / Paul Simshauser -- 10. Strengths and weaknesses of the nordic market model / Chlo. Le Coq and Sebastian Schwenen -- 11. The evolution of the European model for electricity markets / Fabien Roques -- Part II: Adapting to new technologies and new policy priorities -- 12. New technologies on the supply side / Nils May and Karsten Neuhoff -- 13. New technologies on the demand side / Fereidoon Sioshansi -- 14. Tools and policies to promote decarbonization of the electricity sector / Kathryne Cleary, Carolyn Fischer and Karen Palmer -- 15. Shifting supply as well as demand: The new economics of electricity with high renewables / Richard Green -- 16. The future design of the electricity market / Michael G. Pollitt -- 17. New business models in the electricity sector / Jean-Michel Glachant -- 18. Electrifying transport: Issues and opportunities / Bentley C. Clinton, Christopher R. Knittel and Konstantinos Metaxoglou -- 19. Electrification of residential and commercial heating / Mathilde Fajardy and David M. Reiner -- 20. Harnessing the power of integration to achieve universal electricity access: The case for the integrated distribution framework / Ignacio J. P.rez-Arriaga, Divyam Nagpal, Gr.goire Jacquot and Robert Stoner -- 21. Reforming China's electricity industry: National aspiration, bureaucratic empires, local interests / Xu Yi-chong -- 22. The evolution of electricity sectors in Africa: Ongoing obstacles and emerging opportunities to reach universal targets / Vivien Foster, Anton Eberhard and Gabrielle Dyson -- Index.

"With twenty-two chapters written by leading international experts, this volume represents the most detailed and comprehensive Handbook on electricity markets ever published. It covers all dimensions of electricity markets: wholesale and retail; renewable electricity sources; the electrification of mobility, heating and cooling; and recent innovations such as distributed generation, electrical energy storage, demand response and digital platforms that are disrupting the industry. The benefits, as well as the limits, of open markets and competition are assessed at the level of underlying principles and with reference to specific cases, including the UK, PJM Interconnection, Texas, Australia, Scandinavia, continental Europe and China. The details of electricity market designs are analysed and discussed. The book also considers new emerging business models, as well as the impact of electricity sector policy priorities such as universal access and deep decarbonization. This Handbook is intended to be used and useful. Students and young professionals will find the information they need to enter the field. Researchers, experienced professionals and public decision-makers will get a comprehensive update on the topical issues in electricity markets that will guide them through the important developments the sector is witnessing."--

As electric restructuring spreads rapidly across countries and states, leading industry experts are increasingly concerned that in many instances policy makers are pushing their proposals into practice more quickly than policy analysts can provide answers to difficult questions of market design. In this process, different structures for organizing this industry are evolving without a firm basic understanding of their implications for long-term market performance. There is a risk that, in the process, we may be inadvertently locked into an inferior market design that will be costly to change. Designing Competitive Electricity Markets develops some guiding principles to be used when evaluating alternative proposals for reorganizing the US electric power industry. Preliminary versions of the papers in this book were presented at a Workshop convened by the Electric Power Research Institute and held at Stanford University in March 1997. The authors are prominent economists, operation researchers, and engineers who have been instrumental in the development of the conceptual framework for electric power restructuring both in the United States and in other countries. Rather than espousing a particular market design for the industry's future, each author focuses on an important issue or set of issues and tries to frame the questions for designing electricity markets using an international perspective. The book focuses on the economic and technical questions important in understanding the industry's long-term development rather than providing immediate answers for the current political debates on industry competition. Extensive issues are covered, including: the role of the system operator; the problems of ensuring longer-term investment in expanding the transmission system, and in industry research and development; the problems in pricing that are created by arbitrarily segmenting related markets; the relationship between efficiency in the near and long term; ownership rights and incentives; and designing experiments to better understand the operation of different auction mechanisms. The intended audience for this volume includes policy-makers, policy-oriented academics, and corporate leaders with an interest in designing workable and more efficient electricity markets. The arguments in each chapter are based upon sound economic principles but do not require expertise in mathematical modeling or technical economic analysis