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ISBN: 978-1-119-17935-1
To my parentsr
[Jeremy Lin]
and
To Gaby, Pris, and Andy
[Fernando H. Magnago]
Dr. Jeremy Lin has more than 18 years of experience in power system planning, operations, and markets. He has extensive knowledge about industry restructuring and electricity market developments in the United States. He also has significant experience in modeling, simulation, analysis of restructured electricity market, transmission system analysis, power flow analysis, and advanced computer technology applications to power system. He is currently affiliated with PJM Interconnection. Dr. Lin received his MSEE in power and energy systems from University of Illinois at Urbana–Champaign and Ph.D. in electric power engineering from Drexel University. He has published numerous publications in both top-ranked journals and conference proceedings. Currently, he has various collaborative research works with many researchers from domestic and international institutions. He is a senior member of IEEE.
Dr. Fernando H. Magnago has more than 28 years of experience in research and development in power system software and devices. He is a professor in the Department of Electrical and Electronic Engineering at National University of Rio Cuarto, Argentina, working on undergraduate, graduate, and research projects related to power system analysis, optimization, and production simulation. He has designed and developed analytical techniques and softwares principally related to fault analysis, state estimation, and security-constrained unit commitment. Dr. Magnago is the author of 3 books, a book chapter, 22 journal papers, and 70 conference publications in the area of power systems.
Why did an electricity market emerge? How does it really work? What are the performance measures that we can use to tell that the electricity market under consideration is well functioning? These are the questions that will be explored in this book. The main purpose of this book is to introduce the fundamental theories and concepts that underpin the electricity markets which are based on three major disciplines: electrical power engineering, economics, and optimization methods.
This book is intended for first-year graduate students or senior-year undergraduate students as well as practitioners and professionals who would like to study the fundamental and advanced topics in electricity markets. The backgrounds of students or readers should not necessarily be restricted to the disciplines mentioned above. Emergence of markets in many engineering disciplines, such as electrical power engineering and telecommunication engineering, challenges us to draw upon the theories and concepts beyond the realm of such engineering disciplines. A good understanding of these fundamental concepts is necessary to further enhance the understanding of the complex operation of power system and electricity markets.
Representation of physical systems by mathematical equations is fairly common in many engineering disciplines. This book is no exception to this tradition. However, the authors try to have a level of mathematical sophistication so that the material is accessible to many students and practitioners as well as the important issues will be treated in a rather meaningful way.
The first chapter of the book will briefly describe the nature and characteristics of electric power system, and cover the basic drivers for the transformation of electricity industry in the United States and around the world. With that tremendous change brings challenges and complex issues. Understanding these complex issues requires both basic and advanced knowledge of electrical power engineering principles, microeconomic theories, and basic and advanced optimization methods. Therefore, fundamentals of electric power system are treated in Chapter 2, and relevant microeconomic theories are introduced in Chapter 3.
The key components of power system economic operation—unit commitment, economic dispatch, and optimal power flow—are covered in Chapters 4, 5, and 6. After having a solid understanding in the areas of how the power system is operated, students will be exposed to the fundamental elements of electricity markets to understand how electricity markets are designed and structured. For this reason, we will cover the design, structure, and operation of an electricity market in Chapter 7.
So, what is the outcome, intended or unintended, of the electricity market operation explained in the previous chapter? The topics that will be covered in Chapter 8 include market pricing, such as zonal pricing versus nodal pricing, market modeling, and simulation of electricity markets which have wide applications in the industry. With the emergence of any electricity market, the issue of market power and its mitigation, market performance, and other issues naturally appear. These issues are the inevitable results of a deliberate coalescence of economic theories and physical law-based electric power system. The fundamental approaches and methods used to evaluate an electricity market, particularly detecting and mitigating market power are broadly treated in Chapter 9. Students who have basic understanding of these topics will be in a better position to understand more complex issues that subsequently arise from the operation of electricity markets.
In Chapter 10, we will deal with one of the critical issues, that is, the system planning under the context of electricity market regime. We will provide reasons why there are new ways to solve the same problem, because the electric power system which has operating electricity markets has tremendous amount of economic data related to power system at its disposal. These new data will enable us to solve the same problem in new ways. Another emerging issue is the role that the electricity market will play under smart grid and microgrid environments. We will also provide some qualitative arguments related to those emerging, yet important, topics in the final chapter, Chapter 11.
While the book covers several topics related to electricity markets and the fundamental theories behind them, it is a challenge for an instructor to cover all the chapters in this book for a one-semester course. It is therefore necessary to make some choices as to cover which chapters that are deemed important for the students. The authors would also like to acknowledge that it is not possible to include all relevant references and sources for all the materials covered in this book. However, interested readers can explore more by tracking additional references which are outside of these given in the further reading section of each chapter.
The authors would like to express their sincere gratitude towards many colleagues at various organizations, academic and research institutions, and their former academic advisors. The authors particularly would like to thank Herminio Pinto from Nexant, and Diego Moitre and Juan Alemany from GASEP, Argentina. This book could not have been complete without previous discussions and research work done with them. The authors would also like to thank reviewers who made valuable comments and suggestions in the first manuscript which helped improve the final content of the book.
The book is dedicated to anyone who is and will be fascinated by the complex operation of electricity markets both in the United States and around the world.
JEREMY LIN
FERNANDO HUGO MAGNAGO