Market Mechanisms for Competitive Electricity

This is a project report from the Power Systems Engineering Research Center (PSERC). PSERC is a multi-university Center conducting research on challenges facing a restructuring electric power industry and educating the next generation of power engineers. More information about PSERC can be found at the Center's website: Notice Concerning Copyright Material PSERC members are given permission to copy without fee all or part of this publication if appropriate attribution is given to this document as the source material. This report is available for downloading from the PSERC website. Executive Summary This project is concerned with the design and analysis of market mechanisms and instruments that support competitive operation of electric power systems. The project emphasizes the interaction between the economic and technical aspects of competitive electricity markets. Our research focused on several specific topics. • Theoretical and experimental studies of alternative auction structures and their implications for participants' behavior and the efficient operation of the system. • How market rules in conjunction with system characteristics influence market power. • Congestion management and transmission pricing. • Design and analysis of financial instruments for asset valuation and risk management in electricity markets. • Understanding price formation and market operation. • Optimal unit commitment algorithms for competitive electricity. • Design of demand-side contracts. This report provides brief summaries of our research reports and publications addressing the various topics outlined above, classified by subject area with annotated references to published results.