This book describes the latest microeconomic concepts and operations research (OR) techniques needed to comprehend the design and operation of power markets, as well as the actions of their agents: producers, consumers, operators, and regulators. This is critical when it comes to addressing a constantly evolving power system environment that incorporates an increasing number of no-marginal-cost renewable sources, increasingly competitive storage facilities, increasingly responsive demands, and widespread communication channels that allow distributed decision-making. Such evolving environments call for a re-examination of the microeconomic concepts and OR techniques required by graduate students and practitioners in the electric energy field.
This accessible, tutorial-style book features numerous illustrative examples to help readers grasp the economic concepts and OR procedures used by power market professionals. The authors explian these concepts and procedures and present a vision of a renewable-dominated marketplace. Each chapter also includes exercises.
Author(s): Makoto Tanaka, Antonio J. Conejo, Afzal S. Siddiqui
Series: International Series in Operations Research & Management Science, 327
Publisher: Springer
Year: 2022
Language: English
Pages: 326
City: Cham
Preface
Contents
1 Demand
1.1 Introduction
1.2 Utility
1.2.1 Utility Function
1.2.2 Quadratic Utility Function
1.3 Demand for Goods
1.3.1 Utility Maximization and Demand Function
1.3.2 Linear Demand Function
1.3.3 Substitutes and Complements
1.4 Elasticity
1.4.1 Price Elasticity of Demand
1.4.2 Elasticity for Linear Demand
1.4.3 Various Cases of Elasticity
1.5 Consumer Surplus
1.5.1 Gross Benefit and Consumer Surplus
1.5.2 Maximizing Consumer Surplus
1.6 Demand Aggregation
1.6.1 Market Demand
1.6.2 Aggregation of Consumer Surplus
1.7 Demand Response
1.8 Prosumer
1.9 Summary
1.10 End-of-Chapter Exercises
References
2 Supply
2.1 Introduction
2.2 Operating Costs
2.2.1 Calculating Operating Costs
2.2.2 Short-Run Supply Stack
2.2.3 Economic Dispatch
2.3 Investment Costs
2.3.1 Calculating Levelized Costs
2.3.2 Screening Curves
2.3.3 Investment Planning
2.4 Profit Maximization
2.4.1 Short-Run Profit Maximization
2.4.2 Long-Run Profit Maximization
2.5 Variable Renewable Energy Sources
2.6 Energy Storage
2.7 Summary
2.8 End-of-Chapter Exercises
2.9 GAMS Codes
References
3 Market Clearing
3.1 Introduction
3.2 Day-Ahead Market
3.2.1 Single-Node Single-Period Auction
3.2.2 Single-Node Multi-Period Auction
3.2.3 Network-Constrained Single-Period Auction
3.2.4 Network-Constrained Multi-Period Auction
3.2.5 Stochastic Auction
3.3 Intra-Day Market
3.4 Futures Market
3.5 Summary
3.6 End-of-Chapter Exercises
3.7 GAMS Codes
References
4 Marginal Pricing
4.1 Introduction
4.2 Marginal Pricing and Investment-Cost Recovery
4.2.1 Optimal Control and Perfect Knowledge
4.2.2 Perfect Competition
4.3 Marginal Pricing and Short-Term Efficiency
4.3.1 Un-congested Clearing
4.3.2 Congested Clearing
4.3.3 General Formulation
4.4 Non-convexities and Marginal Pricing
4.4.1 Non-convexities: Illustrative Example
4.4.2 Non-convexities: General Formulation
4.5 Uncertainty: Two-Stage Marginal Pricing
4.5.1 Uncertainty: Illustrative Example
4.5.2 Uncertainty: General Formulation
4.6 Multi-Period Marginal Pricing
4.6.1 Multi-Period: Illustrative Example
4.6.2 Multi-Period: General Formulation
4.7 Summary
4.8 End-of-Chapter Exercises
4.9 GAMS Codes
References
5 Market Power
5.1 Introduction
5.2 Concept of Market Power
5.2.1 Monopoly
5.2.2 Lerner Index
5.2.3 Monopsony
5.3 Oligopoly
5.3.1 Game Theory
5.3.2 Cournot Oligopoly
5.3.3 Herfindahl-Hirschman Index
5.3.4 Stackelberg Oligopoly
5.4 Multiple Leaders
5.4.1 Market Clearing: Primal Problem, Dual Problem, and Optimality Conditions
5.4.2 Producer 1 Exercising Market Power
5.4.3 Producer 2 Exercising Market Power
5.4.4 Consumer 1 Exercising Market Power
5.4.5 Consumer 2 Exercising Market Power
5.4.6 Multiple Agents Exercising Market Power
5.5 Summary
5.6 End-of-Chapter Exercises
5.7 GAMS Codes
References
6 Environmental Externalities
6.1 Introduction
6.2 Negative Externalities
6.3 Market-Based Mechanisms for Pollution Control
6.3.1 Taxation and Permit Schemes
6.3.2 Renewable Portfolio Standards
6.4 Network-Constrained Models with Externalities
6.4.1 First-Best Policy for CO Emissions
6.4.2 CO Taxation in a Deregulated Electricity Industry
6.4.3 Renewable Portfolio Standard in a Deregulated Electricity Industry
6.5 Summary
6.6 End-of-Chapter Exercises
6.7 GAMS Codes
References
7 Investment
7.1 Introduction
7.2 Transmission Expansion
7.2.1 Transmission Expansion Under Central Planning
Indices and Sets
Parameters
Binary Variables
Continuous Variables
7.2.2 Bi-Level Transmission Expansion
Dual Variables
7.3 Generation Expansion
7.3.1 Generation Expansion Under Central Planning
7.3.2 Bi-Level Generation Expansion
7.4 Summary
7.5 End-of-Chapter Exercises
7.6 GAMS Codes
References
Index
