Efficient and Reliable Competitive Market for Electric Power: Integrating Electrical Engineering and Experimental Economics

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ECS-9732845 Thomas This project is designed to settle specific economic and engineering questions arising from the restructuring of the electric power industry. Of specific interest are those questions related to the introduction of competitive markets for the generation of electricity. We note that there are unique physical aspects associated wit h the supply of electricity (e.g., instantaneous matching of supply and demand, unintended congestion of parallel transmission routes and maintenance of system stability in response to disturbances). Others include the prospect of localized market power. Because of these and other aspects of reliable electric power supply, traditional theories of efficient markets and auction structures developed for other commodities through years of experience may not be efficient if applied without alteration to markets for electricity. Conversely, current utility rules of operation developed for a centrally-planned regime may not be ideal in terms of providing economically efficient or reliable operating practices in a competitive environment. The objective of this research is to determine a new balance between ideal economic market mechanisms and traditional utility operating practices that will provide inexpensive energy for consumers and maintain system stability. Computer simulations of electricity networks along with laboratory markets that combine human-subject behavior and power systems behavior are the tools we propose to develop and use. The group of researchers assembled consists of theoretical and experimental economists and power/control systems engineers who are uniquely qualified to address issues of market structure, auction mechanisms and rules, and the viability of continuing to use computer programs such as large scale optimal power flow models (OPF), unit commitment (UC) and security constrained dispatch that have been used historically to guide operations.