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E-raamat: Economics of Power Systems: Fundamentals for Sustainable Energy

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In order to manage the transition towards a sustainable future electricity system, an in-depth understanding of the key technological, economic, environmental and societal drivers for electricity markets is required. Suitable for advanced undergraduate and graduate students, this textbook provides an overview of these drivers and introduces readers to major economic models and empirical evidence for the study of electricity markets and systems.





Readers will learn about electricity generation, demand, transport, and storage, as well as the fundamentals of grid and electricity markets in Europe. By introducing them to state-of-the-art models from operations research and economics, the book provides a solid basis for analytical insights and numerical modeling. Furthermore, the book discusses the policy instruments and design choices for electricity market regulation and sustainable power system development, as well as the current challenges for smart energy systems.
1 Introduction
1(6)
2 Fundamentals of Energy and Power Systems
7(36)
2.1 Physical and Engineering Basics
8(10)
2.1.1 Energy and Power and Thermodynamic Systems
8(4)
2.1.2 Laws of Thermodynamics
12(1)
2.1.3 Thermodynamic State Variables, Energy Transformation and Carnot Efficiency
13(5)
2.2 Energy, Economy and Society
18(4)
2.3 Challenges of Resource Availability and Environmental Damage
22(9)
2.3.1 Resource Availability
22(5)
2.3.2 Environmental Damage
27(4)
2.4 Energy Transformation Chain and Energy Balances
31(6)
2.4.1 Energy Terms and Energy Transformation Chain
31(3)
2.4.2 Energy Balances
34(2)
2.4.3 Energy Flowchart
36(1)
2.5 Particularities of Electricity and the Electricity Sector
37(2)
2.6 Further Reading
39(1)
2.7 Self-check of Knowledge and Understanding and Exercises
39(4)
References
41(2)
3 Energy Demand
43(16)
3.1 Electricity Demand
44(9)
3.1.1 Basics
44(1)
3.1.2 Applications on the Demand Side
45(1)
3.1.3 Load Profiles
46(2)
3.1.4 Demand-Side Management
48(2)
3.1.5 Projecting Electricity Demand
50(1)
3.1.6 Electricity Tariffs
51(2)
3.2 Heat Demand
53(2)
3.3 Further Reading
55(1)
3.4 Self-check of Knowledge and Exercises
55(4)
References
57(2)
4 Electricity Generation and Operational Planning
59(74)
4.1 Conventional Generation Technologies
60(22)
4.1.1 Fossil-Fired Technologies
60(10)
4.1.2 Nuclear Energy
70(7)
4.1.3 Combined Heat and Power Generation (CHP)
77(5)
4.2 Renewable Generation Technologies
82(27)
4.2.1 Hydropower
84(7)
4.2.2 Wind Power
91(5)
4.2.3 Solar Energy
96(5)
4.2.4 Bioenergy
101(3)
4.2.5 Other Renewable Energy Technologies
104(5)
4.3 Key Characteristics of Electricity Generation Technologies
109(8)
4.3.1 Technical and Environmental Characteristics
109(4)
4.3.2 Economic Characteristics
113(2)
4.3.3 Levelized Cost of Electricity
115(2)
4.4 Scheduling Electricity Generation--The Unit Commitment and Dispatch Problem
117(10)
4.4.1 Day-Ahead Operational Planning
117(8)
4.4.2 From Day-to-Day Planning to Portfolio Management
125(2)
4.5 Further Reading
127(1)
4.6 Self-check of Knowledge and Exercises
128(5)
References
131(2)
5 Electricity Transport and Storage
133(42)
5.1 Electricity Transmission and Distribution
134(27)
5.1.1 Basics of Electricity Networks
134(4)
5.1.2 Physical Principles of Power Flow
138(11)
5.1.3 Electricity Network Components
149(5)
5.1.4 System Operation
154(7)
5.2 Storage
161(7)
5.2.1 Basics
161(1)
5.2.2 Technologies
162(6)
5.3 Further Reading
168(1)
5.4 Self-check of Knowledge and Exercises
169(6)
References
171(4)
6 Regulation: Grids and Environment
175(60)
6.1 Grid Regulation
176(22)
6.1.1 Fundamentals of Electricity Market Regulation
176(2)
6.1.2 Non-discriminatory Grid Access, Unbundling and Price Regulation
178(6)
6.1.3 Practical Challenges of Performance-Based Regulation
184(3)
6.1.4 Principles of Network Pricing
187(11)
6.2 Environmental Effects and Environmental Policy
198(29)
6.2.1 Externalities
198(2)
6.2.2 Emissions, Environmental Impacts and Emission Reduction Technologies
200(12)
6.2.3 Policy Instruments
212(6)
6.2.4 Limiting Climate Change
218(9)
6.3 Further Reading
227(1)
6.4 Self-check of Knowledge and Exercises
228(7)
References
229(6)
7 Simple Electricity Market Equilibrium Models
235(36)
7.1 Short-Term Market Equilibrium Without Transmission Constraints
236(11)
7.1.1 Simple, Graphical Approach: Merit-Order Model
236(4)
7.1.2 Assumptions Underlying the Concept of Perfect Competition
240(2)
7.1.3 Formal Model
242(1)
7.1.4 Application
243(4)
7.2 Short-Term Market Equilibrium with Two Grid Nodes
247(3)
7.2.1 Graphical Model
248(1)
7.2.2 Formal Model
249(1)
7.3 Optimal Power Flow Model and Nodal Pricing
250(5)
7.4 Long-Term Market Equilibrium
255(8)
7.4.1 Formal Model
255(3)
7.4.2 Graphical Model
258(2)
7.4.3 Application
260(3)
7.5 Further Reading
263(1)
7.6 Self-check of Knowledge and Exercises
264(7)
References
269(2)
8 Markets: Organisation, Trading and Efficiency
271(22)
8.1 Organisation of the Electricity Sector
272(1)
8.2 Basics of Electricity Trading
272(4)
8.3 Key Market Design Choices
276(2)
8.4 Balancing Groups: Coordination Between Electricity Trading and Grid Operation
278(3)
8.5 Information Efficiency: Links Between Spot and Future Markets
281(4)
8.5.1 Law of One Price
281(1)
8.5.2 Link Between Spot and Futures Markets
282(1)
8.5.3 Efficient Market Hypothesis and Link Between Spot and Future Prices
283(1)
8.5.4 Implications of Storability
284(1)
8.5.5 Implications of Limited Storability
285(1)
8.6 Future and Option Payoffs and Hedging of Physical Positions
285(4)
8.7 Further Reading
289(1)
8.8 Self-check of Knowledge and Exercises
289(4)
References
291(2)
9 Imperfect Competition and Market Power
293(22)
9.1 Indicators and Analyses of Market Power
294(2)
9.1.1 Indicators and Analyses of Market Structure
294(1)
9.1.2 Indicators and Analyses of Market Conduct
295(1)
9.1.3 Indicators and Analyses of Market Results
295(1)
9.2 Simple Models of Imperfect Competition in Wholesale Markets
296(3)
9.3 Applications of Models of Imperfect Competition to Power Systems
299(2)
9.4 Imperfect Competition in Retail Markets: Modelling Customer Switching Behaviour
301(5)
9.4.1 Basic Model with One Retail Market Segment
302(3)
9.4.2 Extension to Several Retail Segments
305(1)
9.5 Workable Competition and Market Monitoring
306(2)
9.6 Further Reading
308(1)
9.7 Self-check of Knowledge and Exercises
309(6)
References
312(3)
10 Electricity Markets in Europe
315(42)
10.1 Spot Markets
316(4)
10.1.1 Day-Ahead Markets
316(1)
10.1.2 Intraday Markets
317(1)
10.1.3 Cross-Border Trading
318(2)
10.2 Derivative Markets
320(2)
10.3 Management of Reserves
322(4)
10.4 Provision of Other System Services
326(2)
10.5 Capacity Mechanisms
328(4)
10.6 Congestion Management in Electricity Markets
332(5)
10.6.1 Capacity Allocation Methods
333(2)
10.6.2 Congestion Alleviation and Redispatch
335(2)
10.7 Retail Markets
337(10)
10.7.1 Retail Contract Types
338(1)
10.7.2 Competition on Retail Markets and Retail Prices
339(2)
10.7.3 Energy Poverty
341(1)
10.7.4 Self-supply, Grid Parity and Level of Autonomy
342(5)
10.8 Markets in Europe Versus North America
347(3)
10.9 Further Reading
350(1)
10.10 Self-check of Knowledge and Exercises
350(7)
References
352(5)
11 Valuing Flexibilities in Power Systems as Optionalities
357(30)
11.1 Prices as Stochastic Processes
358(6)
11.2 Hourly Price Forward Curves to Link Future and Spot Prices
364(3)
11.3 Valuing Simple Options on a Stochastic Spot Price
367(3)
11.4 Analytical Approaches for Option Valuation: The Black-Scholes Model
370(5)
11.5 Merits and Limits of the Black-Scholes Model for Electricity Market Analyses
375(1)
11.6 Thermal and Hydropower Plants as Real Options
376(1)
11.7 Application: HPFC and Parsimonious Real Option Valuation for Thermal Power Plants
377(4)
11.8 Challenge: From Asset to System Perspective
381(1)
11.9 Further Reading
382(1)
11.10 Self-check of Knowledge and Exercises
382(5)
References
385(2)
12 Moving Towards Sustainable Electricity Systems
387(30)
12.1 Challenges in Decarbonisation
389(4)
12.2 Challenges in Balancing Supply and Demand
393(7)
12.2.1 Balancing Energy Production and Demand
394(4)
12.2.2 Balancing Short-Term Fluctuations
398(2)
12.3 Challenges for Grid Operation and Development
400(9)
12.3.1 Grid Extension and Reinforcement Needs
401(3)
12.3.2 Congestion Management and Market Design
404(3)
12.3.3 Voltage Control and Reactive Power Management
407(2)
12.4 Challenges in Prosumer Integration and Network Tariffication
409(2)
12.5 Prospects for Sustainable Energy Systems
411(2)
12.6 Further Reading
413(1)
12.7 Self-check of Knowledge
413(4)
References
414(3)
Index 417
Christoph Weber is a Full Professor of Management Sciences and Energy Economics at the University of Duisburg-Essen, Germany. With a background in Mechanical Engineering and a Ph.D. in Economics, his main research interests are in electricity markets, risk and sustainable energy systems, and the use of operations research methods in connection with energy.





Dominik Möst is a Full Professor of Energy Economics at the Faculty of Business and Economics, Technische Universität Dresden, Germany. He studied Industrial Engineering and Management at the Universität Karlsruhe (TH) and at the ENSGI-INPG Grenoble (Ecole nationale supérieure de Genie Industriel, France), holds a Ph.D. in Economics from the Universität Karlsruhe (TH) and habilitated at the Karlsruhe Institute of Technology (KIT). His research interests are European electricity and gas markets, the integration of renewable energy sources, and energy system modeling, as well as energy and resource efficiency.

Wolf Fichtner is a Full Professor of Energy Economics at the Karlsruhe Institute of Technology (KIT), Germany. He studied Industrial Engineering and Management at the Universität Karlsruhe (TH), holds a doctoral degree in Economics and habilitated at the Universität Karlsruhe (TH). His main research interests are electricity markets, sustainable energy systems, and operations research in energy systems.