Transmission access raises unresolved economic issues

The electric utility industry is in the process of gradual change from a fully regulated industry to one of partial deregulation. Instead of relying on regulation to achieve a fair and equitable price to the consumer for electric energy, the reliance is placed more and more on market forces, through competition, to provide wholesale energy at the best market price. Clearly, open transmission access is required to create a viable competitive wholesale market for new generation resources. This article describes four unresolved, or at least partially unresolved, issues associated with transmission access for wholesale wheeling. Wheeling has been defined as the use of a utility's transmission facilities to transmit power for other buyers and sellers. At least three parties are involved in a wheeling transaction: a seller, a buyer, and one or more wheeling utilities that transmit the power from the seller to the buyer. This article considers wholesale or bulk wheeling only, and does not consider retail wheeling. The four unresolved economic issues described in this article pertain to transmission access: actual cost of providing transmission services; methodology or methodologies used in evaluating the cost of wheeling; contract path versus the actual power flows of the wheel; and issues associated with the formation of transmission regions     

Demand response in U.S. electricity markets: Empirical evidence

Empirical evidence concerning demand response (DR) resources is needed in order to establish baseline conditions, develop standardized methods to assess DR availability and performance, and to build confidence among policymakers, utilities, system operators, and stakeholders that DR resources do offer a viable, cost-effective alternative to supply-side investments. This paper summarizes the existing contribution of DR resources in U.S. electric power markets. In 2008, customers enrolled in existing wholesale and retail DR programs were capable of providing ∼38,000 MW of potential peak load reductions in the United States. Participants in organized wholesale market DR programs, though, have historically overestimated their likely performance during declared curtailments events, but appear to be getting better as they and their agents gain experience. In places with less developed organized wholesale market DR programs, utilities are learning how to create more flexible DR resources by adapting legacy load management programs to fit into existing wholesale market constructs. Overall, the development of open and organized wholesale markets coupled with direct policy support by the Federal Energy Regulatory Commission has facilitated new entry by curtailment service providers, which has likely expanded the demand response industry and led to product and service innovation.     

Reenergizing the grid: greater regulatory, legislative certainty needed

The North American Electric Reliability Council's (NERC) new reliability standards are an important milestone for the council and the electric power industry. They clarify existing NERC reliability standards, and they create the foundation for adopting enforceable standards. The grid ensure that the nation's retail electricity customers enjoy reliable and affordable electricity service, and it enables the country's evolving wholesale electricity markets. To support both functions in the future, the grid will require more investment. The nation's shareholder-owned electric utilities recognize this need and are building transmission facilities. Even with this new spending, the continually growing demand for electricity, coupled with the expanding number of wholesale market transactions, means that more investment will be necessary. To encourage it, a number of regulatory and legislative policies should be adopted at both the federal and the state level to improve investor certainty and cost recovery.     

Challenges for engineers in the electric power industry

In pace with the worldwide trend, the Japanese electric power industries are being deregulated and entering into competitive markets. Generation and a large size retail market are open to competition. The transmission system is open for use by new power suppliers, while utilities get the freedom of new business expansion. Traditional electric power utilities and new players are actively preparing for the new environment. This article discusses the challenges and opportunities for engineers in the electric power industry created by the changes occurring in the industry today.     

Context analysis for a new regulatory model for electric utilities in Brazil

This article examines what would have to change in the Brazilian regulatory framework in order to make utilities profit from energy efficiency and the integration of resources, instead of doing so from traditional consumption growth, as it happens at present. We argue that the Brazilian integrated electric sector resembles a common-pool resources problem, and as such it should incorporate, in addition to the centralized operation for power dispatch already in place, demand side management, behavioral strategies, and smart grids, attained through a new business and regulatory model for utilities. The paper proposes several measures to attain a more sustainable and productive electricity distribution industry: decoupling revenues from volumetric sales through a fixed maximum load fee, which would completely offset current disincentives for energy efficiency; the creation of a market for negawatts (saved megawatts) using the current Brazilian mechanism of public auctions for the acquisition of wholesale energy; and the integration of technologies, especially through the growth of unregulated products and services. Through these measures, we believe that Brazil could improve both energy security and overall sustainability of its power sector in the long run.     

Distributed generation: Semantic hype or the dawn of a new era?

As the electric utility industry continues to restructure, driven both by rapidly evolving regulatory environments and by market forces, the emergence of a number of new generation technologies also profoundly influences the industry's outlook. While it is certainly true that government public policies and regulations have played a major role in the rapidly growing rate at which distributed generation is penetrating the market, it is also the case that a number of technologies have reached a development stage allowing for large-scale implementation within existing electric utility systems. At the onset of any discussion related to distributed generation, one question begs to be answered: is the fact that electric power producing facilities are distributed actually a new and revolutionary concept? Have power plants not always been located across broad expanses of land? The answer to these questions clearly is that electric power plants have always been sited all across the service territories of the utilities owning them. Hence, the opening question: as with many so-called innovations that have been put forward during the recent past, is the entire concept of distributed generation a simple semantic marketing hype or are we actually at the dawn of a new electric power generation era? We believe that a new electric power production industry is emerging, and that it will rely on a broad array of new technologies. This article sets the stage for distributed generation covering such topics as: the present power production situation; what distributed generation is; capability ratings and system interfaces; market penetration of internal combustion engine generators, fuel cells and microturbines; potential generation mix issues, network considerations including power quality, reactive power coordination, reliability and reserve margin, reliability, network redundancy, safety and accountability; public policy and regulatory impact; and standards.     

Deregulation of ESI and privatization of state electric utilities in Thailand

In Thailand, electric supply services have all been taken over by the state and operated under state enterprises since 1968. Under a law empowering its monopoly, state utilities accumulated assets and built up their manpower to expand and operate the power system to serve the whole country. During the time of high growth in power demand in early the1990 s, the government initiated a move to privatize state electric utilities, the pace of which was firmed up after 1997, the year of the financial crash. Engagement of independent power producers (IPPs) through the use of long-term power purchase agreements (PPAs) for supply of electric power into the system operated by state electric utilities was also initiated from the mid 1990s. Total capacity of IPPs and Small Power Producers (SPPs) that sell excess power from cogeneration on to the system) rose and by the late 1990s started to create a constraint on system economic dispatch. In 1999 the National Energy Policy Council (NEPC) approved a recommendation of international consultants to transform the electric supply industry into a structure similar to the system in the United Kingdom. The transformation was proposed to precede corporatization and privatization of state electric utilities. The objectives of deregulation were to revoke the monopoly in ESI, to improve transparency in electricity pricing, to reduce debts of state enterprises, and to improve economic efficiency. Industry participants have voiced strong objection to the industry model proposed. With the change of market structure in UK to the New Electricity Trading Arrangement (NETA), the secretariat of NEPC also proposed a new structure similar to NETA. More acceptance from industry participants have been received for the new structure. However, it has been assumed that the proposed structure would bring improvement in system reliability, drawing investment into power generation in a manner that would be efficient. Tariff has also been expected to become lower because of the competition in power generation and retail trading. The authors argue that, for developing countries, issues of timely investment in new generation and delivery capacity, stable and reasonable price of electricity, reliability of power supply, fuel diversity and security, equitable access of supply and promotion of social equity are important. Maintaining a functioning ESI that meet the broad objectives of providing reliable power supply to serve social and economic development needs could be prioritized over introduction of complete competition in wholesale generation and retailing. The authors examine the present situation of the industry and propose a transitional model that would serve the broad objectives and introduce gradual competition in the industry. The proposed design would unbundle generation from transmission and retailing. It would aso eventually promote intra-regional interconnection and electricity trading.     

Interaction among competitive producers in the electricity market: An iterative market model for the strategic management of thermal power plants

The liberalization of the electricity sector requires utilities to develop sound operation strategies for their power plants. In this paper, attention is focused on the problem of optimizing the management of the thermal power plants belonging to a strategic producer that competes with other strategic companies and a set of smaller non-strategic ones in the day-ahead market. The market model suggested here determines an equilibrium condition over the selected period of analysis, in which no producer can increase profits by changing its supply offers given all rivals’ bids. Power plants technical and operating constraints are considered. An iterative procedure, based on the dynamic programming, is used to find the optimum production plans of each producer. Some combinations of power plants and number of producers are analyzed, to simulate for instance the decommissioning of old expensive power plants, the installation of new more efficient capacity, the severance of large dominant producers into smaller utilities, the access of new producers to the market. Their effect on power plants management, market equilibrium, electricity quantities traded and prices is discussed.     

Regulating technological change—The strategic reactions of utility companies towards subsidy policies in the German,Spanish and UK electricity markets

This paper focuses on how incumbent electric utilities strategically react to subsidy schemes supporting renewable energy technologies in the UK, Germany, and Spain. Firms coordinate the development of their technological capabilities and their political activities to shape their regulatory environment. Analysing the diffusion of wind power in these countries, we show that the different ways, in which firms coordinate their technological and political strategies, lead to very different market outcomes, both for the firms’ market share and the size of the overall market. Although incumbents are usually seen as being resistant to change in energy systems, we show that Spanish utilities proactively drive the diffusion of wind power. We speculate about the relation between the ownership structure of the energy system and its inertia with respect to the integration of new technologies. We derive novel policy implications that explicitly take into account the strategic actions of incumbent firms shaping the technological and regulatory system.     

A review on the economic dispatch and risk management considering wind power in the power market

With the rapid development of world economy, wind power has been given more and more consideration owing to its energy saving and environmental protection. But due to intermittency and unpredictability nature of wind power generation, many new problems come into being when infusing wind power into power network with conventional generators. Aiming at these difficulties, this paper presents a review on the historical research production of this theme. The models of economic dispatch schedule of wind power considering dissimilar actual condition, different optimized algorithms and risk management in the electric market are discussed and the future trend is prospected in this paper.     

A review on the economic dispatch and risk management of the large-scale plug-in electric vehicles (PHEVs)-penetrated power systems

Nowadays, the deterioration of ecological environment and the ever rising gas price make green transportation our relentless pursuit. Energy-saving, low-emission even zero-emission electric vehicles (EVs) have been considered as one solution to the problem. With the rapid development of plug-in electric vehicle (PHEV) and forceful support and incentives from the government, PHEV and its supporting facilities are being gradually popularized. When randomly being connected to the power grid in large scale, PHEVs will bring new challenges to power grid in operation and management. This paper presents an overall review on historical research on power system integrated with electric vehicles and especially focuses on economic dispatch of PHEV in the electricity market. The paper also discusses the joint scheduling problem considering other renewable energy resources and risk management of PHEV-penetrated power systems.     

Competitive energy markets and nuclear power: Can we have both,do we want either?

In 1987, the UK Conservative Party was re-elected promising to transform the electricity industry into a privatised competitive industry and to promote an expansion of nuclear power. Fulfilling both objectives was not possible. The nuclear plants were withdrawn from the sale and plans to build new plants were abandoned, but privatisation proceeded. In 2007, the Labour government began a new attempt to build nuclear plants to operate in the competitive electricity market, promising that no subsidies would be offered to them. By 2010, the utilities that were planning to build nuclear plants were beginning to suggest that ‘support’ in some form would be needed if they were to build new plants. More surprisingly, the energy regulator, Ofgem, cast doubt on whether a competitive wholesale electricity market would provide security of supply. In 1990, the UK government opted for a competitive electricity market over expanding nuclear power. Now, the option of opting for a competitive electricity market may not exist. However, this might not leave the way open for new nuclear plants. The expected cost of power from new nuclear plants is now so high that no more than one or two heavily subsidised plants will be built.     

Impacts on investments,and transmission/distribution loss through power sector reforms

This study analyses original panel data from 86 countries between 1985 and 2006. Econometric methods were used to identify the effects of different policy devices of power sector reforms on performance indicators (installed capacity per capita, transmission and distribution loss) in the countries analyzed. The research findings suggest that reform variables such as the entry of independent power producers (IPPs), unbundling of generation and transmission, establishment of regulatory agencies, and the introduction of a wholesale spot market are the driving forces of increasing generation capacity, as well as reducing transmission and distribution loss in the respective regions. In this study, we can assume that, firstly, different electric industry’s reform policies/measures have different impacts on geographically and economically diverse countries. Secondly, a country’s state of economic development has a different impact on policy effects of reforms. Thirdly, coexistent with independent regulatory agencies, reform policy becomes more powerful in realizing sector performances.     

Value-based system facility planning - a rational response to conflicting customer and regulatory demands

In a competitive energy market in which power supply reliability influence customer's purchasing decisions, utilities throughout the world are rapidly recognizing that they cannot ignore customer preferences. Reliability of electric service should be based on balancing the costs to a utility and the value of the benefits received by its customers. The customer survey approach is based on the assumption that customers are in the best position to understand how interruptions impact their activities that depend on electricity supply. A challenge to electric utilities is to increase the market value of the services they provide with the right amount of reliability and to lower its costs of operation, maintenance, and construction to provide lower rates for customers. Lastly, the value-based reliability cost-benefit assessment helps electric utilities to achieve the goal of providing reliable energy service at the lowest possible cost, which their customer values.     

Reshaping the electric power industry

The electric power industry has entered a period of rapid change — with profound implications for the health of the global economy and natural environment. Many of today's vertically integrated utilities are likely to be restructured or broken up in the coming decade, yielding a commodity market in power generation and transmission, and a competitive services market at the local distribution level. The transformation of the industry is being driven both by broad trends toward privatization and deregulation, and by rapid advances in energy producing and consuming technologies. Devices such as fuel cells, photovoltaics, and flywheels will open the way to a more decentralized power industry in which electricity generation and storage facilities are increasingly located in customers' own facilities — integrated and controlled by new digital communications systems.     

Fostering economic demand response in the Midwest ISO

The Midwest Independent System Operator (MISO) runs the power grid in 14 states and one Canadian province and has a peak demand of some 116,000 MW. Its operational area is richly supplied with reliability-triggered demand response programs such as direct load control of residential appliances and curtailable/interruptible rates for commercial and industrial customers. However, economic demand response programs are lacking. This paper discusses three different ways in which such programs can be introduced in the wholesale energy markets run by MISO. These include, first, an approach in which utilities and load serving entities move retail customers to dynamic pricing and other time-based pricing rates; second, an approach in which these same entities and possibly third-parties bid price responsive demand curves into the wholesale market; and third, an approach in which demand response is bid as a supply resource into the wholesale market.     

The British Model in Britain: Failing slowly

In 1990, Britain reorganised its electricity industry to run on competitive lines. The British reforms are widely regarded as successful and the model used provides the basis for reforms of electricity industries worldwide. The main reason for this perception of success is major reductions in the real price of electricity with no reduction in service quality. This paper examines whether the reputation of the British reforms is justified. It concludes that the reputation is not justified and that serious fundamental problems are beginning to emerge. The central question is: have the British reforms resulted in the creation of efficient wholesale and retail markets? On this criterion, the reforms have failed. The wholesale market is dominated by obscure long-term contracts, privileged access to the market and self-dealing within integrated generator/retailers, leaving the spot markets with minimal liquidity and unreliable prices. The failure to develop an efficient wholesale market places the onus on consumers to impose competitive forces on electricity companies by switching regularly. Small consumers will not do this and they are paying too much for their power. For the future, there is a serious risk that the electricity industry will become a weakly regulated oligopoly with a veneer of competition.     

Power plant investment in restructured markets

Investment opportunities in electric power generation have changed dramatically since electricity industry restructuring first began. In contrast to regulated utilities adding capacity in line with central planning and regulation, power plant investment is now more often made by independent companies who market power across multiple utility jurisdictions. Because the regulatory approval process is long and outcomes uncertain, developers often plan multiple options for a given development budget. As more information is revealed about the future prospects at different sites, options are abandoned sequentially until only projects that will be completed remain. In this paper we evaluate the decision to build new generation facilities in a changing and uncertain regulatory environment. We estimate hazard rates for new power plant projects using a database of generation projects in North America and examine in greater detail the development patterns in California and Texas, two states with very different regulatory regimes. We find that regulatory uncertainty significantly affects the pattern of development in the electric power generation industry.     

IEEE Power Engineering Review

This article provided three themes found in the development of electric utility related laws: laws enacted to change electric utility business practices have been based on historical events of the time, with a view toward providing more stability in business and consumer sectors; laws to date have not been comprehensive in deference to the rights of individual states to determine the business structure and operations of electric utilities within their legal jurisdiction; and in general, new laws that have been enacted tend to carry the best elements of the previous laws, while attempting to provide more relevancy according to the historical needs of the time. This provides an incremental, circular advancement of legal landmarks establishing guidelines for electric utility businesses and consumer interactions. With the advent of utility deregulation and the move towards enabling competition, this process has culminated in calls for a more comprehensive, federal legal structure in the United States. This is because of the changing nature of wholesale and retail power sales and purchases that are increasingly traveling beyond the political boundaries of states, and are more inclined to follow a regional, market-based grid formation. New enactments must be rooted in the most effective provisions found in existing legislation, such as wise business practice regulation and promotion of competition and environmental safeguards.     

Data integration/exchange - Part 1: existing technical and business opportunities

The deregulation of the electric utility industry combined with development of advanced technology has raised many questions as how to make the power system operation more cost effective while preserving a high level of reliability and security. The utilities are developing different strategies for achieving this goal, enabling them to stay competitive. Many other new businesses are being formed to take advantage of the new opportunities in the marketplace.This article provides an overview of the possible new technical and business opportunities and benefits in developing advanced strategies for data integration and information exchange. It describes the efforts to discover new approaches to formulating a successful business strategy that would ensure competitiveness, with particular focus on the role of data integration and information exchange in developing new technical and business opportunities in the deregulated market place. In order to put the above discussion into better perspective, two new applications, namely a comprehensive fault and disturbance analysis and a novel two-stage state estimation, are presented as illustrative examples of how additional benefits can be obtained through assigning new business value to information and data.