During the last five years, Illinois Institute of Technology in Chicago has been offering a master’s degree program in electricity markets which is a joint venture between the College of Engineering and the School of Business. The subject of this book is currently offered as a required course for students majoring in the master of electricity markets. We believe that the subject of this book will be of interest to power engineering faculty and students, consultants, vendors, manufacturers, researchers, designers, and electricity marketer, who will find a detailed discussion of electricity market tools throughout the book with numerous examples.
We assume that the readers have a fundamental knowledge of power system operation and control. Much of the topics in this book are based on the presumption that there are two major objectives in establishing an electricity market: ensuring a secure operation and facilitating an economical operation. Security is the most important aspect of the power system operation be it a regulated operation or a restructured power market. In a restructured power system, security could be ensured by utilizing the diverse services available to the market.
The economical operation facilitated by the electricity market is believed to help reduce the cost of electricity utilization, which is a primary motive for restructuring and a way to enhance the security of a power system through its economics. To accomplish these objectives, proper market tools must be devised and efficient market strategies must be employed by participants based on power system requirements. The topics covered by this book discuss certain tools and procedures that are utilized by the ISO as well as GENCOs and TRANSCOs.
These topics include electricity load and price forecasting, security-constrained unit commitment and price-based unit commitment, market power and monitoring, arbitrage in electricity markets, generation asset valuation and risk analysis, auction market design for energy and ancillary services, as well as transmission congestion management and pricing. For instance, chapters that discuss price forecasting, price-based unit commitment, market power, arbitrage, and asset valuation and risk analysis, present market tools that can be utilized by GENCOs for analyzing electricity market risks, valuation of GENCO’s assets and formulation of their strategies for maximizing profits.
The chapters that discuss load forecasting, gaming methods, security-constrained unit commitment, ancillary services auction, and transmission congestion management and pricing present market tools that can be utilized by certain market coordinators (such as the ISOs). In addition, the chapter that discusses transmission congestion management and pricing present the role of TRANSCOs in restructured electric power systems. We have intended to preserve the generality in discussing the structure and the operation of electricity markets so that the proposed tools can be applied to various alternatives in analyzing the electricity markets.
We take this opportunity to acknowledge the important contributions of Professor Muwaffaq Alomoush of the Yarmouk University to our book. He provided much of the presentation in Chapter 10 on transmission congestion management and pricing. We thank Dr. Ebrahim Vaahedi (Perot Systems) and Professor Noel Schulz (Mississippi State University) who reviewed an earlier version of this book and provided several constructive comments. This book could not have been completed without the unconditional support of our respective families. We thank them for their sacrifice and understanding.
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