Introduction

• Overview of power markets
• Example companies we will use throughout the course:
  - Tradition Utility – a vertically integrated utility in a highly regulated marketplace
  - NuUtilities – a utility operating in a competitive marketplace with ISO
  - MerchGen – a merchant generation company owning central generation and rooftop solar

Power Market Participants and Structures

• Market Participants
  - Functions performed in the market by market participants
  - The five sectors of market participants (electric suppliers, transmission owners and system operators, distribution companies, retail suppliers, consumers)
  - Different types of entities active in each sector and what their needs are
  - Case study: Identifying appropriate market participants for different types of transactions
• Market structures
  - What an electric market is
  - The unique properties of electricity that affect how markets function
  - The differences between vertically integrated and competitive markets
  - The electric market transaction chain (how electricity is physically delivered and how ownership of supply changes throughout the chain)
  - Wholesale markets – organized (ISO/RTO etc.) vs. wheeling
  - Retail markets – retail access (direct access and community aggregation) vs. monopoly utility
  - Market structures
  • Vertically integrated monopoly utility
  • Single buyer with competitive generation (with and without an ISO)
  • Wholesale/industrial competition
  • Complete retail competition
  • Hybrid (retail competition with default utility supply)
    - Market structures in the U.S., Canada, and around the world
    - Case study: How market structures impact choices for market participants

Electric Supply and Demand

• Demand
  - Definition of electric demand
  - The key factors affecting electric demand (short-term and long-term)
  - Load curves
  - Key demand quantities (baseload demand, average demand, peak demand, load factor)
  -Load duration curves
  -How residential, commercial, and industrial customers use electricity and characteristics of their usage
  -How aggregation of the various customers’ usage results in system load curves
  -How electric demand varies with time, weather, business activity, and season
  -How electric prices affect electric demand
  -Demand side management (DSM) programs (energy efficiency, load management) and how they are used to reduce demand
  -How demand levels and time-of-use affect generation costs and wholesale prices
  -Models used to forecast demand (aggregated and sectoral end-use models)
  -Case study: Forecasting future utility demand
• Supply
  -Key factors driving electric supply availability (short-term and long-term)
  -Technologies and fuels used to generate electricity (central plus distributed)
  -Generation mixes in regions of the U.S. and other regions of the world
  -Key characteristics of generation (capital cost, variable cost, flexibility, time to construct, environmental regulations, location of unit)
  -The characteristics of each type of generation in use today
  -How fuel costs affect the marginal cost of electricity
  -DSM as a supply option
  -How the key characteristics combined with available supply results in a dispatch stack
  -How the dispatch stack affects the market price of electricity
  -Using models to predict supply availability
  -Case study: Forecasting market prices based on market supply and demand

Power Markets and Services

• Power Markets
  -What a power market is and an overview of different markets
  -Self-owned assets as an alternative to buying services in markets
  -Bilateral markets (including electronic exchanges)
  -ISO markets
  -Tariff (fully regulated) markets
  -Case study: Identifying the right market for a specific transaction
• Power Services
  -Characteristics and examples of each type of service
  -Capacity (call options, capacity obligations)
  -Energy (forward, day-ahead, real-time)
  -Ancillary services (operating reserves, voltage support or VARs, black start)
  -Transmission (point-to-point, network)
  -Environmental credits (renewable energy credits or RECs, emissions allowances)
  -Which services trade in which markets
  -Case study: Choosing the right service to fulfill a specific need

How Power Markets Work

• A definition of trading arrangements
• The variables that determine how trading arrangements are structured
• The three methods of organizing trading arrangements (wheeling, integrated, decentralized)
• The Wheeling Method
  -System operations
  -Ensuring sufficient capacity
  -Generation and load scheduling
  -Ancillary services scheduling
  -Transmission scheduling
  -Providing real-time energy
  -Pricing for various services
  -Types of markets used under this method
  -Roles for market participants
  -Case study: Market participation in a wheeling market
• The Integrated Method
  -System operations
  -Ensuring sufficient capacity (including capacity auctions)
  -Generation and load scheduling
  -Ancillary services scheduling
  -Transmission scheduling
  -Providing real-time energy
  -Pricing for various services (including Locational Marginal Pricing for energy)
  -Types of markets used under this method
  -Roles for market participants
  -Case study: Market participation in an integrated market
• The Decentralized Method
  -System operations
  -Ensuring sufficient capacity
  -Generation and load scheduling
  -Ancillary services scheduling
  -Transmission scheduling
  -Providing real-time energy
  -Pricing for various services (including zonal prices for energy)
  -Roles for market participants
  -Case study: Market participant in a decentralized market