As electric restructuring spreads rapidly across countries and states,
leading industry experts are increasingly concerned that in many
instances policy makers are pushing their proposals into practice more
quickly than policy analysts can provide answers to difficult questions
of market design. In this process, different structures for organizing
this industry are evolving without a firm basic understanding of their
implications for long-term market performance. There is a risk that, in
the process, we may be inadvertently locked into an inferior market
design that will be costly to change.
Designing Competitive Electricity Markets develops some guiding principles to be used when evaluating alternative
proposals for reorganizing the US electric power industry. Preliminary
versions of the papers in this book were presented at a Workshop
convened by the Electric Power Research Institute and held at Stanford
University in March 1997. The authors are prominent economists,
operation researchers, and engineers who have been instrumental in the
development of the conceptual framework for electric power
restructuring both in the United States and in other countries.
Pigou vs. Coase. The intellectual fight
about the structure of the electricity transmission industry also
involves disputes over how centralized or decentralized the
transmissiom market can be. Designing Competitive Electricity Markets is an excellent source of insight about these arguments. This book
contains thoughtful essays by a who's who of academic electricity
experts, including Paul Joskow, Schmuel Oren, William Hogan, Vernon
Smith, Robert Wilson, and Hung-po Chao.
This is a rich book on the subject of how to design competitive
electricity markets that ranges in style form survey papers of the
literature. It provides a good introduction to the subject and will
allow readers to familiarise themselves with many of the basic
arguments behind the details of electricity market design.
The Journal of Energy Literature 7:1 (2001)
Rather than espousing a particular market design for the industry's
future, each author focuses on an important issue or set of issues and
tries to frame the questions for designing electricity markets using an
international perspective. The book focuses on the economic and
technical questions important in understanding the industry's long-term
development rather than providing immediate answers for the current
political debates on industry competition. Extensive issues are
covered, including: the role of the system operator; the problems of
ensuring longer-term investment in expanding the transmission system,
and in industry research and development; the problems in pricing that
are created by arbitrarily segmenting related markets; the relationship
between efficiency in the near and long term; ownership rights and
incentives; and designing experiments to better understand the
operation of different auction mechanisms.
The intended audience
for this volume includes policy-makers, policy-oriented academics, and
corporate leaders with an interest in designing workable and more
efficient electricity markets. The arguments in each chapter are based
upon sound economic principles but do not require expertise in
mathematical modeling or technical economic analysis.
Peter VanDoren reviews this book in "Making
Sense of Electricity Deregulation" (pdf), Regulation, Volume
23, No 3, 2000, published by the Cato Policy Institute.
Michael Pollitt, U. of Cambridge, reviews this book
in Journal of Energy Literature 7(1): 113-115, 2001.
Andrew Kleit, Pennsylvania State University, reviews
this book in Energy Journal 20(4): 150-153, 1999.