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Designing Competitive Electricity Markets

This volume contains chapters by leading industry analysts on the key driving economic and technical issues that need resolution in order to design competitive electricity markets.
As electric restructuring spreads rapidly across countries and states,leading industry experts are increasingly concerned that in manyinstances policy makers are pushing their proposals into practice morequickly than policy analysts can provide answers to difficult questionsof market design. In this process, different structures for organizingthis industry are evolving without a firm basic understanding of theirimplications for long-term market performance. There is a risk that, inthe process, we may be inadvertently locked into an inferior marketdesign that will be costly to change.
Designing Competitive Electricity Markets develops some guiding principles to be used when evaluating alternativeproposals for reorganizing the US electric power industry. Preliminaryversions of the papers in this book were presented at a Workshopconvened by the Electric Power Research Institute and held at StanfordUniversity in March 1997. The authors are prominent economists,operation researchers, and engineers who have been instrumental in thedevelopment of the conceptual framework for electric powerrestructuring both in the United States and in other countries.Pigou vs. Coase. The intellectual fightabout the structure of the electricity transmission industry alsoinvolves disputes over how centralized or decentralized thetransmissiom market can be. Designing Competitive Electricity Markets is an excellent source of insight about these arguments. This bookcontains thoughtful essays by a who's who of academic electricityexperts, including Paul Joskow, Schmuel Oren, William Hogan, VernonSmith, Robert Wilson, and Hung-po Chao.
Regulation, 23:3This is a rich book on the subject of how to design competitiveelectricity markets that ranges in style form survey papers of theliterature. It provides a good introduction to the subject and willallow readers to familiarise themselves with many of the basicarguments 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'sfuture, each author focuses on an important issue or set of issues andtries to frame the questions for designing electricity markets using aninternational perspective. The book focuses on the economic andtechnical questions important in understanding the industry's long-termdevelopment rather than providing immediate answers for the currentpolitical debates on industry competition. Extensive issues arecovered, including: the role of the system operator; the problems ofensuring longer-term investment in expanding the transmission system,and in industry research and development; the problems in pricing thatare created by arbitrarily segmenting related markets; the relationshipbetween efficiency in the near and long term; ownership rights andincentives; and designing experiments to better understand theoperation of different auction mechanisms.The intended audiencefor this volume includes policy-makers, policy-oriented academics, andcorporate leaders with an interest in designing workable and moreefficient electricity markets. The arguments in each chapter are basedupon sound economic principles but do not require expertise inmathematical 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.

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