Power System Economics: Designing Markets for Electricity [Paperback]

Steven Stoft (Author)

Book Description

ISBN-10: 0471150401 | ISBN-13: 978-0471150404 | Publication Date: May 17, 2002 | Edition: 1st

The first systematic presentation of electricity market design-from the basics to the cutting edge. Unique in its breadth and depth. Using examples and focusing on fundamentals, it clarifies long misunderstood issues-such as why today's markets are inherently unstable. The book reveals for the first time how uncoordinated regulatory and engineering policies cause boom-bust investment swings and provides guidance and tools for fixing broken markets. It also takes a provocative look at the operation of pools and power exchanges.
* Part 1 introduces key economic, engineering and market design concepts.
* Part 2 links short-run reliability policies with long-run investment problems.
* Part 3 examines classic designs for day-ahead and real-time markets.
* Part 4 covers market power, and
* Part 5 covers locational pricing, transmission right and pricing losses.
The non-technical introductions to all chapters allow easy access to the most difficult topics. Steering an independent course between ideological extremes, it provides background material for engineers, economists, regulators and lawyers alike. With nearly 250 figures, tables, side bars, and concisely-stated results and fallacies, the 44 chapters cover such essential topics as auctions, fixed-cost recovery from marginal cost, pricing fallacies, real and reactive power flows, Cournot competition, installed capacity markets, HHIs, the Lerner index and price caps.

About the Author
Steven Stoft has a Ph.D. in economics (U.C. Berkeley) as well as a background in physics, math, engineering, and astronomy. He spent a year inside FERC and now consults for PJM, California and private generators. Learn more at www.stoft.com.

Editorial Reviews

Review

"This book is for anyone seeking to understand how cost/price relationships involved in electrical energy production and distribution may ideally be determined." (Electrical Apparatus, August 2002)

"...the quality of its content deserves a wide readership..."(Power System Economics The Journal of Energy Literature, Vol.V111, No.2, 2002)

From the Author

How a Basic Book Came to Provide Cutting Edge Tools
Steven Stoft ([e-mail]), April 22, 2002.
The economics of power systems differs from that of other markets in appearance and in reality. But appearances deceive and produce false new economic theories—e.g., competitive pricing cannot pay the cost of power plants. The real differences lie hidden and allow a blind faith that "the market" will solve all problems—e.g., provide a reliable level of generation capacity.

I began the book knowing that much of this confusion could be cleared up by stripping away apparent differences to show that power markets usually work like normal markets. Economics does not need re-writing, only careful application. But power systems present some genuine puzzles.

Applying basic economics to apparent differences leads to familiar results. I have presented these results simply along with examples for the uninitiated. The same approach leads to surprising results when applied to real differences. For example, the demand side of today’s power markets is quantitatively so different from standard text-book markets that it produces an unusual type of market failure. Part 2 of the book reveals how the lack of coordination between engineers and regulators, in controlling this failure, produces the headline-grabbing price spikes characteristic of current markets.

Part 3 analyzes day-ahead and real-time markets but also asks fundamental questions about the need for complex pools. Are their calculations subverted by the bids of speculators? Observations of Eastern pools suggest power-market design is still in its early stages. This book provides a simple yet solid foundation, diagnoses the problems that now threaten the existence of deregulated markets, and provides tools to help make repairs.

See all Editorial Reviews

Product Details

• Paperback: 496 pages
• Publisher: Wiley-IEEE Press; 1st edition (May 17, 2002)
• Language: English
• ISBN-10: 0471150401
• ISBN-13: 978-0471150404
• Product Dimensions: 9.3 x 7.6 x 0.9 inches
• Shipping Weight: 1.9 pounds (View shipping rates and policies)
• Average Customer Review: 3.2 out of 5 stars  See all reviews (6 customer reviews)
• Amazon Best Sellers Rank: #548,027 in Books (See Top 100 in Books)

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Customer Reviews

Most Helpful Customer Reviews

12 of 14 people found the following review helpful:

1.0 out of 5 stars A disappointing book for economists..., April 22, 2003

By A Customer

Amazon Verified Purchase

This review is from: Power System Economics: Designing Markets for Electricity (Paperback)

... or those wishing to see what economists really have to offer regarding power systems. Stoft's technical discussion of power markets, or locational pricing, mechanisms is just fine. But he offers nothing about the economics of electricity transmission, without which spatially diverse power markets are merely a theory. As such, his book is of no particular use to those looking to understand the economic issues that bedevil large power markets, like those in the US, where persistent transmission constraints can impair the functioning of the best "market architecture."
"Economics" is a loosely-used term in electricity market circles. Those wishing to understand the economic princiles behind power markets, as opposed to the mechanics of power systems, will have to look elsewhere.

8 of 10 people found the following review helpful:

2.0 out of 5 stars A combination of EE101 and ECO101., September 5, 2002

By 

Ning Jiang "amazon customer" (Austin, TX) - See all my reviews
(REAL NAME)   

This review is from: Power System Economics: Designing Markets for Electricity (Paperback)

cons: It covers a lot of entry level material regarding power system and economics. If you know both power system engineering and economics, it won't be a help since it is too elementary. If you don't know power system or economics, don't expect you can build up a solid background by reading this book.

pros: it is good review of EE101 and ECO101.

Alert: this book really didn't tell you anything about designing a electricity market: the fundmental incentive compatibility is not covered at all!

IT IS JUST A REVIEW BOOK, NOT A GUIDE BOOK YOU CAN DEPENDEND ON FOR MARKET DESIGN ADN ANALYSIS.

6 of 11 people found the following review helpful:

5.0 out of 5 stars Solid coherent text, September 11, 2002

By 

Rajat Sood (Melbourne, Australia) - See all my reviews

This review is from: Power System Economics: Designing Markets for Electricity (Paperback)

Stoft's book provides a coherent and logical framework for understanding power system economics. It discusses the key controversies (or "fallacies") in power markets in a clear and easily-understandable way. There is a lot of confusion on these topics these days, not only in the press, but in a lot of the literature. Lots of commentators have vested interests, which colours their analysis and comment. Stoft's book helps bring the debates back to first principles. A textbook like this can never anticipate every question or issue that arises in every power market in the world, but the book provides a good framework for understanding the fundamentals, which the reader can then apply and extend to issues of his/her own interest. A good read.