Restructuring Of Electric Industry Research Articles

Economic and Political Constraints on the Demand-Side of Electricity Industry Re-structuring Processes

this paper identifies the major political and economic constraints that impact the demand-side of electricity industry re-structuring processes. These constraints have been a major barrier to implementing effective restructuring processes in many countries, particularly those in the developing world. The paper describes how these constraints have been addressed and how this has harmed market efficiency and system reliability using examples from re-structuring processes around the world. The paper proposes demand-side regulatory interventions to manage these constraints in a manner that limits the harm to wholesale market efficiency. Finally, specific regulatory inventions for developing countries are proposed.

Transition, Concentration and Labor Productivity within the Electricity Industry in Romania

The electricity industry from Romania, similarly to all the EU27 countries, is in a continuous process of transformation along three axes: liberalization, disintegration (unbundling) and privatization. The objective of this article is to study the effects generated by the reform into the electricity industry from Romania upon the market concentration and labor productivity into the sector. The main conclusions of this paper are the following: (1) reform reduced the degree of concentration in all segments of the value chain, followed by a consolidation process, emphasized after 2011; (2) labor productivity increased and the number of employees decreased due to electricity industry restructuring.

Prediction using learning coefficients for efficient operation of deregulated electricity market

Deregulation and restructuring of electric power industry is occurring in many parts of the world. It is aimed at introducing competition in the supply and retail side of the industry, while maintaining control over the transmission lines. Tracing methodology hence had been introduced to overcome problems related to the Marginal pricing of transmission costs. This paper first analyses of the proportional method which leads to a redefined power tracing method, and then further refines the proposed prediction method by establishing trends of the learning coefficients, using them to examine the relationship between accuracy and number of samples taken. Response of individual generators to change in demand and the corresponding associated losses are also presented. MATLAB with matpower4.0b extension was used to present the study on the IEEE 24bus RTS.

Managing Unilateral Market Power in Electricity

This paper first describes those features of the electricity supply industry that make a prospective market monitoring process essential to a well-functioning wholesale market. Some of these features are shared with the securities industry, although the technology of electricity production and delivery make a reliable transmission network a necessary condition for an efficient wholesale market. These features of the electricity supply industry also make antitrust or competition law alone an inadequate foundation for an electricity market monitoring process. This paper provides examples of both the successes and failures of market monitoring from several international markets. More than 10 years of experience with the electricity industry restructuring process has shown that market failures are more likely and substantially more harmful to consumers than other market failures because of how electricity is produced and delivered and the crucial role it plays in the modern economy. Wholesale market meltdowns of varying magnitudes and durations have occurred in electricity markets around the world, and many of them could have been prevented if a prospective market monitoring process backed by the prevailing regulatory authority had been in place at the start of the market.

Smart Grid and Its Implications for Electricity Market Design

Recently, smart grid has been considered a very important new energy delivery technology, and one that can help ensure a cleaner environment by making use of information and communication technology (ICT) in countries around the world. The many technological benefits smart grid offers is expected to bring about a huge change in the electric energy supply chain. In particular, smart grid with advanced ICT is likely to allow market agents to participate in the decision-making process in the restructured electricity industry, easily facilitating Homeostatic Utility Control. In this paper, we examine smart grid as a market externality, and then illustrate issues from the commercial market perspective as it relates to electricity market design. Finally, our paper identifies some of the impacts of smart grid on electricity market design, which may possibly be incorporated into the evolution of the electricity market, thus ensuring market efficiency.

Electricity market design for facilitating the integration of wind energy: Experience and prospects with the Australian National Electricity Market

Australia has been an early and enthusiastic adopter of both electricity industry restructuring and market-based environmental regulation. The Australian National Electricity Market (NEM) was established in 1999 and Australia also implemented one of the world's first renewable energy target schemes in 2001. With significant recent growth in wind generation, Australia provides an interesting case for assessing different approaches to facilitating wind integration into the electricity industry. Wind project developers in Australia must assess both potential energy market and Tradeable Green Certificate income streams when making investments. Wind-farm energy income depends on the match of its uncertain time varying output with the regional half hourly market price; a price that exhibits daily, weekly and seasonal patterns and considerable uncertainty. Such price signals assist in driving investments that maximize project value to the electricity industry as a whole, including integration costs and benefits for other participants. Recent NEM rule changes will formally integrate wind generation in the market's scheduling processes while a centralized wind forecasting system has also been introduced. This paper outlines experience to date with wind integration in the NEM, describes the evolution of market rules in response and assesses their possible implications for facilitating high future wind penetrations.

Characterization of the loss allocation techniques for radial systems with distributed generation

In the restructured electricity industry, meaningful loss allocation methods are required in order to send correct signals to the market taking into account the location and characteristics of loads and generations, including the local sources forming the distributed generation (DG). This paper addresses the issues related to loss allocation in radial distribution systems with DG, with a three-fold focus. First, the key differences in the formulation of the loss allocation problem for radial distribution systems with respect to transmission systems are discussed, specifying the modeling and computational issues concerning the treatment of the slack node in radial distribution systems. Then, the characteristics of derivative-based and circuit-based loss allocation techniques are presented and compared, illustrating the arrangements used for adapting the various techniques to be applied to radial distribution systems with DG. Finally, the effects of introducing voltage-controllable local generation on the calculation of the loss allocation coefficients are discussed, proposing the adoption of a “reduced” representation of the system capable of taking into proper account the characteristics of the nodes containing voltage-controllable DG units. Numerical results are provided to show the time evolution of the loss allocation coefficients for distribution systems with variable load and local generation patterns.

Electric power industry restructuring and ROE: The case of Korea Electric Power Corporation

Korea's electric power industry was previously run by Korea Electric Power Corporation (KEPCO) in a natural monopoly-type structure. As economy of scale was waning in influence and management effectiveness began to increase in importance, KEPCO was divided into six subsidiaries and faced competition beginning in April 2001. This study evaluates the restructuring process for Korea's power industry and analyzes the financial outcomes based on return on equity (ROE). The results show that the ROE ratio increased. In the analysis period (1993–2004), the financial ratio showed a better performance than that before restructuring. However, productivity ratios such as productivity of capital (or gross value added to total assets) and gross value added to property, plant, and equipment decreased compared to the situation before restructuring. It is believed that the results were due to the increased financial leverage of KEPCO. For this reason, KEPCO should make further efforts to manage its debt in a systematic way.

Power plant investment in restructured markets

Investment opportunities in electric power generation have changed dramatically since electricity industry restructuring first began. In contrast to regulated utilities adding capacity in line with central planning and regulation, power plant investment is now more often made by independent companies who market power across multiple utility jurisdictions. Because the regulatory approval process is long and outcomes uncertain, developers often plan multiple options for a given development budget. As more information is revealed about the future prospects at different sites, options are abandoned sequentially until only projects that will be completed remain. In this paper we evaluate the decision to build new generation facilities in a changing and uncertain regulatory environment. We estimate hazard rates for new power plant projects using a database of generation projects in North America and examine in greater detail the development patterns in California and Texas, two states with very different regulatory regimes. We find that regulatory uncertainty significantly affects the pattern of development in the electric power generation industry.

ATC enhancement using TCSC via artificial intelligent techniques

Procurement of optimum available transfer capability (ATC) in the restructured electricity industry is a crucial challenge with regards to open access to transmission network. This paper presents an approach to determine the optimum location and optimum capacity of TCSC in order to improve ATC as well as voltage profile. Real genetic algorithm (RGA) associated with analytical hierarchy process (AHP) and fuzzy sets are implemented as a hybrid heuristic technique in this paper to optimize such a complicated problem. The effectiveness of the proposed methodology is examined through different case studies.

Emissions Trading, Electricity Restructuring, and Investment in Pollution Abatement

This paper analyzes an emissions trading program that was introduced to reduce smog-causing pollution from large stationary sources. Using variation in state level electricity industry restructuring activity, I identify the effect of economic regulation on pollution permit market outcomes. There are two main findings. First, deregulated plants in restructured electricity markets were less likely to adopt more capital intensive environmental compliance options as compared to regulated or publicly owned plants. Second, as a consequence of heterogeneity in electricity market regulations, a larger share of the permitted pollution is being emitted in states where air quality problems tend to be more severe. (JEL L51, L94, L98, Q53, Q58)

Lessons from International Experience with Electricity Market Monitoring

The author first describes those features of the electricity supply industry that make a prospective market monitoring process essential to a well-functioning wholesale market. Some of these features are shared with the securities industry, although the technology of electricity production and delivery make a reliable transmission network a necessary condition for an efficient wholesale market. These features of the electricity supply industry also make antitrust or competition law alone an inadequate foundation for an electricity market monitoring process. The author provides examples of both the successes and failures of market monitoring from several international markets. More than 10 years of experience with the electricity industry restructuring process has shown that market failures are more likely and substantially more harmful to consumers than other market failures because of how electricity is produced and delivered and the crucial role it plays in the modern economy. Wholesale market meltdowns of varying magnitudes and durations have occurred in electricity markets around the world, and many of them could have been prevented if a prospective market monitoring process backed by the prevailing regulatory authority had been in place at the start of the market.

Electric power grid interconnection in Northeast Asia

In spite of regional closeness, energy cooperation in Northeast Asia has remained unexplored. However, this situation appears to be changing. The government of South Korea seems to be very enthusiastic for power grid interconnection between the Russian Far East and South Korea to overcome difficulties in finding new sites for building power facilities to meet its need for increased electricity supplies. This paper analyzes the feasibility of this electric power grid interconnection route. The issues addressed include electricity market structures; the prospects for electric power industry restructuring in the Russian Federation and South Korea; the political issues related to North Korea; the challenges for the governments involved and the obstacles anticipated in moving this project forward; project financing and the roles and concerns from multilateral and regional banks; and institutional framework for energy cooperation. While there are many technical issues that need to be resolved, we think that the great challenge lies in the financing of this commercial project. Thus, the governments of the Russian Federation and South Korea involved in the project need to foster the development of their internal capital markets and to create confidence with international investors. To this end, on energy side, this involves defining a clear energy policy implemented by independent regulators, speeding up the already started but delayed reform process of restructuring electric power industry and markets, and establishing a fair and transparent dispute resolution mechanism in order to reduce non-commercial risks to a minimum. The paper argues that establishing a framework for energy cooperation in this region will contribute positively towards that end, although views differ regarding its specific form. Finally, given that North Korea has a crucial transit role to play and faces a very unstable political situation, it is concluded that moving the project forward needs to be contingent on a resolution of the North Korea's nuclear crisis.

A Multiobjective Evolutionary Algorithm for the Sizing and Siting of Distributed Generation

In the restructured electricity industry, the engineering aspects of planning need to be reformulated even though the goal to attain remains substantially the same, requiring various objectives to be simultaneously accomplished to achieve the optimality of the power system development and operation. In many cases, these objectives contradict each other and cannot be handled by conventional single optimization techniques. In this paper, a multiobjective formulation for the siting and sizing of DG resources into existing distribution networks is proposed. The methodology adopted permits the planner to decide the best compromise between cost of network upgrading, cost of power losses, cost of energy not supplied, and cost of energy required by the served customers. The implemented technique is based on a genetic algorithm and an /spl epsiv/-constrained method that allows obtaining a set of noninferior solutions. Application examples are presented to demonstrate the effectiveness of the proposed procedure.

Electric Power Grid Interconnection in Northeast Asia

Despite its regional closeness, energy cooperation in Northeast Asia has remained unexplored. However, this situation appears to be changing. The government of South Korea seems to be very enthusiastic for power grid interconnection between the Russian Far East and South Korea to overcome difficulties in finding new sites for building power facilities to meet its need for increased electricity supplies. This paper analyzes the feasibility of this electric power grid interconnection route. The issues addressed include electricity market structures; the prospects for electric power industry restructuring in the Russian Federation and South Korea; the political issues related to North Korea; the challenges for the governments involved and the obstacles anticipated in moving this project forward; project financing and the roles and concerns from multilateral and regional banks; and institutional framework for energy cooperation. While there are many technical issues that need to resolve, we think that the great challenge lies in the financing of this commercial project. Thus, the governments of the Russian Federation and South Korea involved in the project need to foster the development of their internal capital markets and to create confidence with international investors. To this end, on energy side, this involves defining a clear energy policy implemented by independent regulators, speeding up the already started but delayed reform process of restructuring electric power industry and markets, and establishing a fair and transparent dispute resolution mechanism in order to reduce non-commercial risks to a minimum. The paper argues that establishing a framework for energy cooperation in this region will contribute positively towards that end, although views differ regarding its specific form. Finally, given that North Korea has a crucial transit role to play and faces a very unstable political situation, it is concluded that moving the project forward needs to be contingent on a resolution of the North Korea's nuclear crisis.

Electricity derivatives and risk management

Electricity spot prices in the emerging power markets are volatile, a consequence of the unique physical attributes of electricity production and distribution. Uncontrolled exposure to market price risks can lead to devastating consequences for market participants in the restructured electricity industry. Lessons learned from the financial markets suggest that financial derivatives, when well understood and properly utilized, are beneficial to the sharing and controlling of undesired risks through properly structured hedging strategies. We review different types of electricity financial instruments and the general methodology for utilizing and pricing such instruments. In particular, we highlight the roles of these electricity derivatives in mitigating market risks and structuring hedging strategies for generators, load serving entities, and power marketers in various risk management applications. Finally, we conclude by pointing out the existing challenges in current electricity markets for increasing the breadth, liquidity and use of electricity derivatives for achieving economic efficiency.

Electricity industry restructuring revisited: the case of Korea

In 2004, the Korean Government suspended its electricity market reform based on the two-thirds majority recommendation of a six-member joint study team. This suspension effectively interrupts the basic plan adopted in 1998 by the previous administration to divest and privatize Korea Electric Power Corporation's (KEPCO's) generation segment in 2000–2002, implement transmission open access and wholesale competition by 2008, and introduce retail competition thereafter. This policy-decision followed the controversial debate on electricity market reform in Korea. Reform proponents claim that electricity can be treated as ordinary goods exchangeable in the competitive market, and any problems caused by the transition to the market system are manageable. By contrast, reform opponents argue that effective competition of the power industry is not yet feasible due to the idiosyncratic nature of electricity (e.g., low-price elasticity of demand and not being storable at low cost) as well as the country's isolated electricity network. In suspending the electricity reform, the current administration accepted the final conclusion of the joint study team in the Tripartite Commission on the ground that the alleged benefits of reform are theoretical and uncertain, while the real costs and risks are substantial.

Does Competition Reduce Costs? Assessing the Impact of Regulatory Restructuring on U.S. Electric Generation Efficiency

Although the allocative efficiency benefits of competition are a tenet of microeconomic theory, the relation between competition and technical efficiency is less well understood. Neoclassical models of profit-maximization subsume static cost-minimizing behavior regardless of market competitiveness, but agency models of managerial behavior suggest possible scope for competition to influence cost-reducing effort choices. This paper explores the empirical effects of competition on technical efficiency in the context of electricity industry restructuring. Restructuring programs adopted by many U.S. states made utilities residual claimants to cost savings and increased their exposure to competitive markets. We estimate the impact of these changes on annual generating plant-level input demand for non-fuel operating expenses, the number of employees and fuel use. We find that municipally-owned plants, whose owners were for the most part unaffected by restructuring, experienced the smallest efficiency gains over the past decade. Investor-owned utility plants in states that restructured their wholesale electricity markets had the largest reductions in nonfuel operating expenses and employment, while investorowned plants in nonrestructuring states fell between these extremes. The analysis also highlights the substantive importance of treating the simultaneity of input and output decisions, which we do through an instrumental variables approach.

Voltage security and reactive power management

The focus of this paper is on voltage security as a function of ancillary services that can be described in the context of reactive power markets and associated pricing mechanisms. Firstly, an introduction to voltage security and reactive power management is presented and the consequences of recent electricity industry restructuring in the UK are highlighted. Finally, several recently developed algorithmic techniques are presented in detail. The techniques will introduce the concepts of transition‐optimization and congestion management in the context of a complete framework for the monitoring, assessment and control of voltage security.

You Say ISO, I Say Transco . Let's Call the Whole Thing Off: Why Current Electric Utility Unbundling Initiatives Won't Work Without Fundamental Change

This paper contends that the failure of recent electric industry restructuring efforts stems from the Federal Energy Regulatory Commission's two flawed assumptions that: (1) firms will never be able to produce efficiently on an integrated basis; and, as such (2) FERC via regulatory mandate and massive government intervention can create both sua sponte and sui generis efficient input markets (i.e., unbundled transmission and bulk power markets). As a result, FERC's restructuring efforts are doomed to produce perpetually poor market performance because their policies produce a very inefficient way to organize the market. To illustrate this point, this paper first outlines briefly the basic concept of transaction cost economics, and highlights the various types of situation where vertical integration is appropriate and where it is not. Next, this paper analyzes the four primary components of FERC's attempt to fundamentally unbundle the industry, and shows why, from a transaction cost standpoint, FERC's vision is a very inefficient way to organize the market. Following this discussion, this paper presents startling evidence showing the adverse effects of FERC's current flawed restructuring paradigm on consumer welfare. Finally, this paper sets forth several constructive solutions to help FERC move the process forward in a positive and constructive manner.