Structuring Electricity Markets Lester B. Lave Electricity Industry Center Carnegie Mellon University January 10, 2008.

Slides:

Advertisements

Similar presentations

Achieving Price-Responsive Demand in New England Henry Yoshimura Director, Demand Resource Strategy ISO New England National Town Meeting on Demand Response.

Advertisements

The Single Electricity Market in Ireland

Demand Response: The Challenges of Integration in a Total Resource Plan Demand Response: The Challenges of Integration in a Total Resource Plan Howard.

MISO’s Midwest Market Initiative APEX Ron McNamara October 31, 2005.

Chapter 3 – The Role of the Revenue Requirement Revenue Requirement – Operating cost – Capital cost Firm is allowed to make a return on investment called.

A Primer on Electric Utilities, Deregulation, and Restructuring of U.S. Electricity Markets W.M. Warwick July 2000 Revised May 2002.

1 Resource Adequacy and Market Power Mitigation via Option Contracts Hung-po Chao and Robert Wilson EPRI and Stanford University Presentation at POWER.

Solutions to California’s Energy Crisis: Real-Time Pricing by Frank Wolak Chairman, Market Surveillance Committee March 17, 2001.

Utility Regulation March 10, 2011 Raj Addepalli Deputy Director, Electric, Office of Electric,Gas and Water New York State Department of Public Service.

A Capacity Market that Makes Sense Peter Cramton & Steven Stoft 18 March 2005.

Market Overview in Electric Power Systems Market Structure and Operation Introduction Market Overview Market Overview in Electric Power Systems Mohammad.

Organization of the electricity supply industry © 2012 D. Kirschen & University of Washington 0.

SUSTAINABLE ENERGY REGULATION AND POLICY-MAKING FOR AFRICA Module 14 Energy Efficiency Module 14: DEMAND-SIDE MANAGEMENT.

Energy Efficiency in the Power sector Mariangiola Fabbri WWF EPO - Climate and energy unit Ad Hoc Group on Energy Efficiency, 27th March 2006.

Generation Expansion Daniel Kirschen 1 © 2011 D. Kirschen and the University of Washington.

The California energy crisis Introduction (Wolak March ‘01) –Wholesale: averaged $33 MWH in 1999, $116 MWH in 2000, $310MWH Jan –Natural gas $3-$4.

1 THE RATE CASE PROCESS A Blend of Science and Superstition Presentation to the Mongolian Energy Regulatory Board By Burl Haar Executive Secretary Minnesota.

1 The Regulatory Approach to Fostering Investment David Halldearn Ofgem 28 September 2006.

Costs of Ancillary Services & Congestion Management Fedor Opadchiy Deputy Chairman of the Board.

Regulatory Flexibility Committee Competitive Procurement September 18 th Joe Kerecman Director Government and Regulatory Affairs

Rate Design June 23, 2015 Laurie Reid. 2 Overview 1.A little bit of physics 2.The Ratemaking Process 3.Generally Accepted Ratemaking Principles 4.What’s.

Valuing Economic Benefits from Transmission Planning ERCOT System Planning March 22, 2006.

RISK & CAPACITY INVESTMENT INCENTIVES IN ELECTRICITY MARKETS Peter Jackson Department Of Management University Of Canterbury.

Future of Renewables in Victoria Dr Jeff Washusen Marsden Jacob Associates VPELA 30 April 2012.

Electricity Supply in the New Century Dr Malcolm Kennedy Chairman PB Power Ltd including the power businesses of Merz and McLellan and Kennedy & Donkin.

Electric Restructuring In Pennsylvania Sonny Popowsky Pennsylvania Consumer Advocate May 10, 2007 Institute for Regulatory Policy Studies Transforming.

Load Management Strategies to Support Grid Integration of Intermittent Renewable Resources Paulina Jaramillo and Lester Lave.

Overview of the North American and Canadian Markets 2008 APEX Conference in Sydney, Australia October 13, 2008 Hung-po Chao Director, Market Strategy and.

RENEWABLE ENERY & BIOMASS COGENERATION TRAINING – KENYA BY LEWIS B. MHANGO.

Retail Competition: Managing a Difficult Transition David L. O’Connor Commissioner Massachusetts Division of Energy Resources (DOER) Presentation to National.

Dr. Ion LUNGU AFEER President. DRIVERS FOR INVESTMENTS Demand; Fuel availability; Market signals; Production costs; Energy mix; Environmental concerns;

George A. Godding, Jr. Director, Management and Communications Office of Market Oversight and Investigations Comments are the speakers and do not necessarily.

Impact of Liberalization of the Electricity Market on Energy Efficiency, Quality of Supply and Environmental Performance Eric BONNEVILLE ECI Webconference.

Demand Response: Keeping the Power Flowing in Southwest Connecticut Presented by: Henry Yoshimura Manager, Demand Response ISO New England September 30,

Designing Utility Regulation to Promote Investment in Cost-Effective Energy Efficiency Dale S. Bryk Natural Resources Defense Council Pennsylvania.

Rate Design Indiana Industrial Energy Consumers, Inc. (INDIEC) Indiana Industrial Energy Consumers, Inc. (INDIEC) presented by Nick Phillips Brubaker &

Technology for demand side management and demand side bidding for grid companies. Stig Fretheim 15. Mai 2003.

Dealing with Failed Deregulation What would Price C. Watts Do?

PJM©2013www.pjm.com Economic DR participation in energy market ERCOT April 14, 2014 Pete Langbein.

Chapter 14 Integrating Accounting, Finance, Marketing and Economics Accounting and Finance for Entrepreneurs EBD-301 Dr. David P. Echevarria Slide 1 All.

Reasons for Pursuing DG in Ontario Presented by: Mark Wolnik Markham Energy Corp -Director March 5, 2003.

Lave CEIC Assessing Restructured Electricity Markets An APPA Symposium Lester B. Lave Carnegie Mellon Electricity Industry Center February 5, 2007.

Demand Response: What It Is and Why It’s Important 2007 APPA National Conference San Antonio, Texas June 26, :00 a.m. to Noon Glenn M. Wilson Director.

Commission For Energy Regulation Padraig Fleming Manager, Distribution & Retail 22 nd July 2004.

Illinois Wholesale Market Update December 10, 2003.

GIE Annual Conference 3 November 2005, Athens How trading contributes to security of gas supply Colin Lyle Chairman of the Gas Committee European.

Demand Response

To Buy or To Build Is it really one or the other? APPA New Generation Workshop Portland, Oregon August 1, 2007.

Extra electricity slides

Wholesale Electricity Markets: Opportunities and Challenges Howard HaasUSAEE October 27, 2015.

Lessons Learned from Existing RTOs John Moore January WCEA Meeting January 7 th, 2016.

Overview of Market Reforms and the WESM

Today: Finish discussion of trading techniques used in CA Reaction of FERC to these issues Discussion of how FPA limits market Use of antitrust law to.

Role Of ERC in the WESM To enforce the rules and regulations governing the operations of the WESM and monitors the activities of the Market Operator and.

Mario S. DePillis Jr. USAEE Meeting, Pittsburgh, PA October 25-28, 2015.

Consumer Cost Effectiveness of Carbon Mitigation Policies in Restructured Electricity Market Jared Moore and Jay Apt (adviser) CMU Engineering and Public.

3/5/2014 and 3/7/2014 Utility Regulation and Economics.

1 9. BUSINESS STRATEGIES IN ELECTRICITY MARKETS Asko Vuorinen.

Women In Energy Conference Kingston, Jamaica March 10, 2016.

DATA COLLECTION William McCarty Chairman Indiana Utility Regulatory Commission September 9-10 Riga, Latvia.

Resource Adequacy and Market Power Mitigation via Option Contracts

Overview of the U.S. Economy

Strategies of Reliable Transmission of Energy In A Competitive Market

Rate-of-Return Regulation

Resilience and Reliability in PJM’s Competitive Markets

Marginal Cost Pricing: Why Is It Important? Have We Achieved It?

Generation Expansion Daniel Kirschen

Mary J. Healey CT Consumer Counsel NASUCA, President

Dr. Richard A. Rosen Tellus Institute – Boston, MA

Wholesale Electricity Costs

Presentation transcript:

Structuring Electricity Markets Lester B. Lave Electricity Industry Center Carnegie Mellon University January 10, 2008

Rate of Return Regulation: The Good, the Bad, and the Ugly Created a stable structure that attractive massive investment Incorporated R&D (best before 1970) Fostered cooperation among utilities Got electricity to almost every customer Produced rapidly falling real prices & increasing reliability – at least until 1970

RoR Regulation: The Bad Excess investment (Averich-Johnson) Disincentive to take risks, invest in R&D Didn’t build or operate nucs & coal well Large blackouts (1966, 1977, …) PUC goals not low price, efficiency PUC not effective regulator; revolving door

RoR Regulation: The Bad Excess investment (Averich-Johnson) Disincentive to take risks, invest in R&D Didn’t build or operate nucs & coal well Large blackouts (1966, 1977, …) PUC goals not low price, efficiency PUC not effective regulator; revolving door How does this record compare with the free market for, say, mortgages?

Restructuring: Good Outcomes 1.Led to cost cutting & greater efficiency 2.Created transparency in pricing 3.Better capacity factors on nucs & coal 4.Opened market to competitors 5.Encouraged power marketers & ESCOs 6.Ended some industrial subsidies 7.Customer choice: Green Power

Restructuring: Bad Outcomes 1.Incentives for market manipulation: Collusive behavior in power markets => detailed, stringent market monitoring 2.Shifting risks to investors raised cost of capital, ruling out some projects 3.Anemic investment in G & T 4.Little investment in R&D, conservation

Restructuring: Bad Outcomes 6. Continuing to charge customers a price that doesn’t vary with cost 7.Paying market clearing prices to all 8.Much greater profits for some generators 9.Costs of building & operating RTOs 10.Expensive capacity markets that haven’t increased investment in G & T 11.Merchant generation, an investor’s right to build a line anywhere, would disrupt the system Restructuring has not benefited most consumers

Grand Issues What markets can be competitive? –Real time power market –Capacity market Who sets location of G&T, fuel mix? Who should bear risks: demand, fuel price, environmental regs, wages, natural disasters, terrorism, How much politics in these decisions?

Elements of a New Structure How much improvement is possible in ROR regulation? Cost of bringing assets back into rate base? How much improvement is possible in present PJM structure? What are the costs & risks of a new market design?

Some Suggested Tools: Little r Regulation Long-term contracts – power price Long-term contracts- 2-part tariff Contracts for up to life of plant Long-term contracts for transmission Real time pricing Demand side “regulation” & leveling load- duration curve

Lave-Apt-Blumsack Proposal-1 Can’t make hourly power market competitive Long-term contracts react to hourly markets Need to offer life-of-plant contracts 2-part tariffs: fixed & variable cost Pay accepted bid price, not market price RTO dispatches contracted plants RTO determines need for G & T investment & location of plants and lines

Lave-Apt-Blumsack Proposal-2 Customer pays real-time price (PLC) “Large” customers have automatic energy manager device to carry out their orders Use demand side for regulation, lowering peak demand, preventing blackouts

LAB Proposal Problems Competitive market for new generation? Sufficient sites for competition? Fuel price, environmental, other cost escalators? Inducing efficiency? Can RTO forecast demand & location? RTO becomes regional monopoly – same old problems? Role of state PUCs?