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The electricity sector is in an unprecedented time of transition. The industry is in the process of adjusting from traditional fossil-fuel to renewable generation, from large-scale to distributed generation and from vertically-integrated monopolies to verticallyseparated industrial structuresunder diverse formsof competition. Efficient transmission investment planning and regulation is more important than ever, but this task has become extremely complex. Increasing penetration of intermittent generation makes predicting network flow patterns increasingly difficult. Moreover, the potential role for hydrogen as an alternative energy source in both domestic and transportation uses, makes predicting the long-term future of electricity demand more uncertain than at any time in its history. In this paper, we review key issues in electricity transmission investment and regulation. We start by reviewing the task of the theoretical well-intentioned network planner, and the complications that arise when transmission investment is separated from generation investment. We then review the issues associated with governing the transmission planner, including the question whether it is possible to design a financial mechanism which delivers correct incentives. We also discuss the question of whether it is possible to design a mechanism which allows transmission investment to be left entirely to the private sector. We finish with a summary of the key future challenges facing the sector in this time of transition., QC 20210902

In electricity markets, market rules such as price caps defer proper investment in generation. The resulting generation mix is therefore sub-optimal if compared to the one that maximizes social welfare. In this paper, an incentive mechanism for a price-capped multi-area energy only market is proposed. The market model is posed as a mixed complementarity problem using the optimality conditions of all the individual players that participate in the multi-area electricity market. The resulting equilibrium problem is solved using a decomposition approach based on the Alternating Direction Method of Multipliers. The proposed solution algorithm takes advantage of the multi-area structure of the problem and outperforms state-of-the-art practices for solving these types of problems., QC 20201230

For many years, researchers have hoped to find a mechanism for improving incentives for operation, and investment in network assets, based on the value of financial transmission rights. However, attempts to do so using conventional fixed-volume financial transmission rights have failed. In this chapter, we introduce a new concept of financial transmission rights, referred to as generalized FTRs. We demonstrate that, when generators, loads, and the system operator are risk averse they can perfectly hedge by trading in a portfolio of conventional hedge contracts, and, in the case of the system operator, the generalized FTRs. A risk-neutral market participant, referred to here as the trader, takes on the remaining risk in the market and collectively has a payoff equal to the total economic welfare created in the market. The trader therefore has an incentive to augment the network if and only if it is socially beneficial to do so. We illustrate how this gives risk to efficient merchant investment decisions using simple network examples. © Springer Nature Switzerland AG 2020., QC 20201201

The incentive on an electricity generatingfirm to exercise market power depends strongly on thevolume the firm has pre-sold in the forward or hedge markets.Therefore, in order to forecast the effect of mergersand other market developments on market power outcomes,it is essential to model the hedging decisions ofdominant generating firms. This paper shows that a dominantfirm’s profit-maximizing choice of hedge level dependson the extent to which the hedge price varies withthe firm’s hedging decision. In the case in which the hedgeprice is independent of the firm’s hedge level, the optimalchoice of hedging is an “all or nothing” decision. In thiscase, there is no equilibrium level of hedging in purestrategies. This outcome may explain the observed lack ofhedge market liquidity in wholesale electricity marketswith substantial market power. We also model the equilibriumhedging outcome in a two-stage Cournot oligopolyand show that, even if the hedge price is independent of thehedging decisions of the firms, a rational expectationsequilibrium can exist with high levels of hedging if thereare enough firms in the market., QC 20120813

In a typical liberalized wholesale electricity market, the output of controllable units is determined at regular intervals through a dispatch process. However, since the physical limits of power systems must be respected down to time scales shorter than the dispatch interval, in practice system operators must also be able adjust the output of controllable units over very short time frames - typically through the procurement and dispatch of reserves, ancillary services or balancing services. To date, the procurement and dispatch of balancing services has been guided by heuristics and rules of thumb. Yet the approach to the dispatch of balancing services can have a significant impact on the pre-contingent or system normal dispatch of the power system. In principle, improvements in the efficiency of the dispatch of balancing services could significantly improve the efficiency of the utilization of power system assets. This paper observes that the dispatch of balancing services should correspond to optimal dispatch in a dispatch process with a very short dispatch interval. We also identify a set of conditions which the procurement and dispatch of balancing services should satisfy and compare those conditions to the current arrangements for ancillary services in the Australian National Electricity Market., QC 20120813

QC 20120814

QC 20120814