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Power Markets and Economics: Energy Costs, Trading, Emissions



Power Markets and Economics: Energy Costs, Trading, Emissions

Barrie Murray

ISBN: 978-0-470-74301-0 February 2009 324 Pages


It is now almost twenty years since liberalisation and the introduction of competition was proposed for electricity utilities. Some form of restructuring has been widely adopted around the world to suit local objectives. The industry now faces new challenges associated with global warming, rising prices and escalating energy demand from developing countries like China and India. The industry will have to cope with; managing emissions; managing variable energy sources like wind, dev eloping clean coal technology; accommodating distributed generation and new nuclear stations and managing the impact of these developments on the distribution and transmission networks. It is now necessary to consider how the various market structures that were adopted have performed and how they will address some of these new issues and what further changes might be necessary.

This volume presents an all-inclusive analysis of the electricity market structures that have been adopted around the world and how they are performing. It provides an up-to-date analysis of the cost of competing technologies, the operation of energy and ancillary service markets and the impact of renewable sources and emission restrictions. It takes a forward look at likely future developments necessary to cope with the new emerging issues.

  • Part One introduces industry infrastructure, analysing state utilities, the motives behind liberalisation and the resulting structures.
  • Part Two considers generation costs, including renewable generation costs, and investigates the cost of restricting emissions as well as transmission and distribution costs.
  • Part Three discusses market operation, describing how costs affect the organisation of power generation. It covers trading arrangements, ancillary services, international trading and investment.
  • Part Four looks to future markets and technological developments that will shape the industry through the next twenty years. This includes the appraisal of investment opportunities for global power companies and implications for market performance.

Written by an internationally renowned consultant engineer, this book is full of expert insight and balances fundamental methodology and academic theory with practical information and diverse worked examples.

This is an excellent reference on the topic for power system engineers, regulators, banks, investors, and government energy agencies. With its many worked examples, it is also a brilliant tutorial accessible for postgraduates and senior undergraduates in electrical and power engineering.




Part One Industry Infrastructure

Chapter 1 Approach to Restructuring

1.1 Introduction

1.2 Industry Physical Structure

1.3 Introduction of Competition

1.4 Restructuring Options

1.5 Comparison of Structures

1.6 Summary

Chapter 2 Market Mechanisms

2.1 Introduction

2.2 Market Participants

2.3 Market Mechanisms

2.4 Market Implementation

2.5 Price Analysis

2.6 Summary

Part Two The Cost Chain

Chapter 3 Basic Generation Energy Costs

3.1 Introduction

3.2 Cost Components

3.3 Practical Operating Efficiencies

3.4 Impact of Utilisation on Costs

3.5 Comparison of Generation Costs

3.6 International Comparisons

3.7 Summary

Chapter 4 Alternative Energy Sources

4.1 Introduction

4.2 Competing Sources

4.3 Current Production Europe

4.4 Incentive Schemes

4.5 Market Pricing

4.6 The Economics of Alternative Sources

4.7 Comparisons

4.8 Summary

Chapter 5 Emissions

5.1 Introduction

5.2 Emission Trading Schemes (ETS)

5.3 Large Combustion Plant Directive (LCPD)

5.4 Generation CO2 Emissions

5.5 Production Costs

5.6 National Allocation Plans

5.7 Market Operation

5.8 Impact of Capacity Mix

5.9 International Approach

5.10 Summary

Chapter 6 Transmission

6.1 Introduction

6.2 Impact of Transmission Constraints in Markets

6.3 Transmission Charging

6.4 Derivation of Use of System Charges

6.5 International Tariff Comparisons

6.6 Transmission Investment

6.7 Interconnection Investment Appraisal

6.8 International Practice

6.9 Summary

Chapter 7 Distribution

7.1 Introduction

7.2 Market Status

7.3 Commercial Arrangements

7.4 Metering and Balancing

7.5 Cost of Distribution

7.6 Distribution Tariffs

7.7 OPEX Regulation

7.8 Capex Regulation

7.9 Business Risk

7.10 Distributed Generation

7.11 Summary

Chapter 8 End User Charges and Prices

8.1 Introduction

8.2 Price Comparisons

8.3 End user Energy Prices

8.4 Total End User Prices

8.5 Tariff Development

8.6 Customer Switching

8.7 Summary

Part Three Market Operation

Chapter 9 Market Trading

9.1 Introduction

9.2 European Markets

9.3 Developing Markets – China

9.4 Market Power

9.5 Trading Arrangements

9.6 Bilateral Trading

9.7 Balancing Market

9.8 Exchange Trading

9.9 Supplier Risk

9.10 Generation Risk

9.11 Market Interaction

9.12 Arbitrage Spark Spread

9.13 Summary

Chapter 10 Market Analysis

10.1 Introduction

10.2 Modelling Overview

10.3 Dispatch Market Simulation

10.4 Load Duration Model

10.5 Hydro Generation

10.6 Interconnection Modelling

10.7 Predicting Demand Data

10.8 Generation data

10.9 Calculations

10.10 Price Duration Curve

10.11 Statistical Forecasting

10.12 Predicting New Entry

10.13 Summary

Chapter 11 Ancillary Service Markets

11.1 Introduction

11.2 Ancillary Service Requirements

11.3 Market Volume

11.4 Procurement Process

11.5 Cost of Providing Services

11.6 Predicting Revenues

11.7 Summary

Chapter 12 Cross-border Trading

12.1 Introduction

12.2 Governance

12.3 Cross-border Capacity

12.4 New Investment

12.5 Managing Operation

12.6 Capacity Auctions

12.7 Security

12.8 Charging for Wheeling

12.9 International Trading Development

12.10 Summary

Chapter 13 Investment Appraisal

13.1 Introduction

13.2 Overall Analysis

13.3 Analysis of Options

13.4 Plant Costs

13.5 Predicting Revenue

13.6 Bidding/Contracting Strategy

13.7 Evaluating Risk

13.8 Summary

Part Four Market Development

Chapter 14 Market Performance

14.1 Introduction

14.2 Performance Criteria

14.3 Market Shortcomings

14.4 Performance Assessment

14.5 Performance Improvement

14.6 Summary

Chapter 15 Market Developments

15.1 Introduction

15.2 Generation Developments

15.3 Future Plant Mix

15.4 Transmission and Distribution Grids

15.5 Carbon Capture and Storage

15.6 Market Implications

15.7 Summary

Chapter 16 Long-term Scenarios

16.1 Introduction

16.2 Emissions

16.3 Alternative Energy Sources

16.4 The Nuclear Option

16.5 Fuel Prices

16.6 Fuel Supply Security

16.7 System Security

16.8 Clean Coal Technology

16.9 Network Developments

16.10 International Commodity and Freight Markets

16.11 Competition

16.12 Conclusions



Appendix Conversion Tables


?This is a remarkable book which provides essential data for any informed discussion of this vital problem that is so often dominated by ill-informed debate.? (Oxford Prospect, August 2009)

"Murray's overview of the link between engineering and economics in the energy sector provides a timely look at the big challenge for the global power industry.... [It] provides a sound bases for anyone involved in the wider debate on how the market should be shaped." (Engineering and Technology, May 2009)

 "Murray's overview of the link between engineering and economics in the energy sector provides a timely look at the big challenge for the global power industry ? .[It] provides a sound bases for anyone involved in the wider debate on how the market should be shaped." (Engineering and Technology, May 2009)