William W. Hogan

Contract Networks for Electric Power Transmission

A contract network extends the concept of a contract path to address the problem of loop flow and congestion in electric power transmission systems. A contract network option provides an internally consistent framework for assigning long-term capacity rights to a complicated electric transmission network. The contract network respects the special conditions induced by Kirchoffs Laws; accommodates thermal, voltage, and contingency constraints on transmission capacity; and can be adopted without disturbing existing methods for achieving an economic power dispatch subject to these constraints. By design, a contract network would maintain short-run efficiency through optimal spot-price determination of transmission prices. Through payment of congestion rentals, the contract network makes a long-term capacity-right holder indifferent between delivery of the power or receipt of payments in a settlement system. to]Everybody talks about the weather, but nobody does anything about it.

Market power and strategic interaction in electricity networks

Abstract Special conditions in electric networks complicate the analysis of the geographic scope of the horizontal market power. Unlike the conventional setting where a firm exercises market power by restricting its own production, there could be situations in constraining electrical networks where a generator would exercise market power by increasing its production in order to block transmission of a disproportionate amount of competing generation. A model with a set of Cournot firms, a collection of competitive fringe participants and an explicit representation of the electrical network illustrates the possible strategic interactions.

Electricity Market Restructuring: Reforms of Reforms

Electricity systems present complicated challenges for public policy. In many respects these challenges are similar to those in other network industries in providing a balance between regulation and markets, public investment and private risk taking, coordination and competition. As with other such industries, naturally monopoly elements interact with potentially competitive services, but electricity has some unusual features that defy simple analogy to other network industries. Following a reversal of a long-term decline in real electricity prices, the last two decades of the twentieth century were for the United States a time of reform, reaction, and reforms of reforms in electricity systems, moving slowly towards greater reliance on competition and markets. Changing technology, new entrants in the generation market, and a legislative mandate to provide access to the essential transmission facility accelerated a process that required major innovations in institutions and operations. Complete laissez faire competition is not possible, and the details of an efficient competitive electricity market are neither obvious nor easy to put in place. The benefits of reform may be substantial, but they require careful attention to market design. A review of the past identifies some choices on the road ahead.

On Convergence of the PIES Algorithm for Computing Equilibria

Equilibria in market models with continuous market supply functions can be obtained by computing fixed points. With an activity analysis representation of production, fixed-point algorithms would converge slowly. Further, since the market model here is of a partial equilibrium nature, the market demand function may not exhibit the integratability condition, precluding the formulation of the market equilibrium problem as an economic surplus maximization problem. We examine an iterative algorithm, the PIES method, for locating equilibria in markets whose production is described by optimization over a finite set of activities and whose econometric demand function does not possess the integrability property. Convergence properties of the algorithm along with existence and uniqueness of market equilibrium are summarized.

Evaluation of alternatives for power system coordination and pooling in a competitive environment

The paper defines and classifies essential issues that relate the need for electric power system coordination with the increasing development of competition. Principles are formulated and a coordination model and a market structure are proposed, emphasizing the need for economic dispatch in the wholesale market. A detailed comparison is made of the market and pooling implementations developed in Argentina and Chile, countries that have pioneered the creation of competitive markets in the electric energy sector. An evaluation of strengths and weaknesses of those two implementations is included.

Transmission Market Design

Coordinated electricity spot markets support open access to existing transmission grids. Associated financial transmission rights provide a key ingredient for long-term contracting and property rights for grid expansion. Design of a mixed system of merchant and regulated transmission investment presents a challenge for regulators and market participants. With the right choice, merchant transmission investment could play a significant but not exclusive role in efficient transmission expansion. With the wrong choice, the unintended consequences could undermine the whole foundation of electricity market restructuring.

A dynamic putty--semi-putty model of aggregate energy demand

Energy conservation dominated the adjustments of the energy decade. The present study develops further the aggregate analysis to revisit the question of energy flexibility within the context of a multi-factor dynamic model. The resulting model preserves various adding-up constraints, cross-equation parameter restrictions, and consistent indexes within an ad hoc stock adjustment dynamic process. Applications to data for the USA and Japan confirm the estimates of large long-run elasticities under the assumption of a slow adjustment process.

Electric transmission: A new model for old priciples

A contract network framework can provide the basis for transmission access and pricing on a basis that is both equitable and efficient. Under the approach described here, former problems associated with loop flow and opportunity costs disappear, and both the present method of system dispatch and its associated reliability constraints are preserved.

Co-Optimization of Power and Reserves in Dynamic T&D Power Markets With Nondispatchable Renewable Generation and Distributed Energy Resources

Marginal-cost-based dynamic pricing of electricity services, including real power, reactive power, and reserves, may provide unprecedented efficiencies and system synergies that are pivotal to the sustainability of massive renewable generation integration. Extension of wholesale high-voltage power markets to allow distribution network connected prosumers to participate, albeit desirable, has stalled on high transaction costs and the lack of a tractable market clearing framework. This paper presents a distributed, massively parallel architecture that enables tractable transmission and distribution locational marginal price (T&DLMP) discovery along with optimal scheduling of centralized generation, decentralized conventional and flexible loads, and distributed energy resources (DERs). DERs include distributed generation; electric vehicle (EV) battery charging and storage; heating, ventilating, and air conditioning (HVAC) and combined heat & power (CHP) microgenerators; computing; volt/var control devices; grid-friendly appliances; smart transformers; and more. The proposed iterative distributed architecture can discover T&DLMPs while capturing the full complexity of each participating DERs intertemporal preferences and physical system dynamics.

Electricity Scarcity Pricing Through Operating Reserves

Suppressed prices in real-time markets provide inadequate incentives for both generation investment and active participation by demand bidding. An operating reserve demand curve developed from first principles would improve reliability, support adequate scarcity pricing, and be straightforward to implement within the framework of economic dispatch. This approach would be fully compatible with other market-oriented policies. Better scarcity pricing would also contribute to long-term resource adequacy.