Spot Pricing of Electricity

There is a need for fundamental changes in the ways society views electric energy. Electric energy must be treated as a commodity which can be bought, sold, and traded, taking into account its time-and space-varying values and costs. This book presents a complete framework for the establishment of such an energy marketplace. The framework is based on the use of spot prices. In general terms: o An hourly spot price (in dollars per kilowatt hour) reflects the operating and capital costs of generating, transmitting and distributing electric energy. It varies each hour and from place to place. o The spot price based energy marketplace involves a variety of utility-customer transactions (ranging from hourly varying prices to long-term, multiple-year contracts), all of which are based in a consistent manner on hourly spot prices. These transactions may include customers selling to, as well as buying from, the utility. The basic theory and practical implementation issues associated with a spot price based energy marketplace have been developed and discussed through a number of different reports, theses, and papers. Each addresses only a part of the total picture, and often with a somewhat different notation and terminology (which has evolved in parallel with our growing experience). This book was xvii xviii Preface written to serve as a single, integrated sourcebook on the theory and imple­ mentation of a spot price based energy marketplace.

Table of Contents:
1 Overview.- 1.1 Goal of Book.- 1.2 Three Steps to an Energy Marketplace.- 1.3 How Will Customers Respond?.- 1.4 Energy Marketplace Operation: A Developed Country.- 1.5 Energy Marketplace Operation: A Developing Country.- 1.6 Discussion of Chapter 1.- I: The Energy Marketplace.- Preface to Part I: The Energy Marketplace.- 2 Behavior of Hourly Spot Prices.- 3 Energy Marketplace Transactions.- 4 Implementation.- 5 A Possible Future: Deregulation.- II: Theory of Hourly Spot Prices.- 6 Generation Only.- 7 Generation and Network.- 8 Revenue Reconciliation.- 9 Spot Price Based Rates.- 10 Optimal Investment Conditions.- References.- Annotated Bibliography.- Appendices.- A Power System Analysis and Control.- A.1 Network Flows.- A.2 Local Controllers.- A.3 Mathematical Models for System Dynamics.- A.4 Power System Dynamics.- Further Reading.- Notes.- B Power System Operation.- B.1 Short-Term Load Forecasting.- B.2 System Economics.- B.3 System Security.- B.4 Automatic Generation Control (AGC).- B.5 Interconnected Systems.- Further Reading.- Notes.- C Power System Planning.- C.1 Multiple Attribute Decision Making Under Uncertainty.- C.2 Long Range Load Forecasting Models.- C.3 Production Cost Models.- C.4 Financial Models.- C.5 Generation Expansion Programs.- C.6 Network Expansion Programs.- C.7 Feedback Couplings.- Further Reading.- Notes.- D DC Load Flow.- D.1 General Relationships.- D.2 A Potpourri of Results.- D.3 Three-Bus Example.- Notes.- E Customer Response Model Structures.- E.1 Single Period.- E.2 Multiple Period.- Notes.- F FAPER.- F.1 Basic Concepts.- F.2 FAPER Designs.- F.3 Variations on the Basic Concept.- F.4 Analysis of Multiple FAPER Response.- F.5 Incentives to Install FAPERS.- F.6 Discussion.- G Expected Behavior of Spot Prices.- G.1 Introduction.- G.2 24-HourTrajectories.- G.3 Price Duration Curves.- G.4 Impact of Customer Response on Variable Energy Costs.- H Interchange of Derivative and Expectation Operators.