Required Textbooks (Bookstore):
 Daniel Kirschen and Goran Strbac, Fundamentals of Power System Economics, Wiley, 2004

Timothy J. Brennan et al., Alternating Currents: Electricity Markets and Public Policy, Resources for the Future, 2002 (paperback).
OnLine Resource Materials:
Fun Stuff:
 Energy Systems from Soup to Nuts (fun slide show assembled by ECpE Professor Jim McCalley)
(zip file,52M). Caution: Large download.
 This
Electronic Demonstrations
website uses Java animations to show the inner workings of common electronic circuits.
 RealTime Utility Consumption at the ISU Power Plant
(graphical visualization)
Course outline

 Power Market Restructuring: Overview
 Microeconomic Basics for Power Markets
 Market Principles and the Theory of the Firm
 Strategic Market Behavior (Game Theory)
 Markets, Risks, and Contracts
 Optimization Basics for Power Markets
 Introduction to Constrained Optimization
 Optimization Tools for Economic Dispatch
 Operation of Restructured Wholesale Power Markets
 Organization of Power Markets
 Power Market Trading Subject to Transmission Constraints
 Power Systems and LMP Fundamentals
 Bid/OfferBased Optimal Power Flow: Illustrative Experimental Findings
 Market Power Mitigation
 RealWorld Examples: Policy Concerns
 Financial and Operational Risk Management
 System Reliability
 Financial Transmission Rights
 Investment for the Future
 Investment in New Generation
 Investment in New Transmission
 Environmental Issues
 Emission Control
 Potential for "Green Power"
 Future Prospects for Restructuring
Topics, Readings, and Exercise Assignments
This power economics course covers topics essential for understanding current controversies surrounding the restructuring of wholesale power markets both here in the U.S. and abroad. Required readings are marked below with two asterisks (**), and recommended materials are marked below with a single asterisk (*).
Lecture materials, exercises, and some additional required and recommended materials will be posted at the syllabus as the course proceeds. All such additions will be announced in class and will be marked with a "new" icon for at least one week after the modification is made.
I. Power Market Restructuring: Overview
** EXERCISE 1 (Individual): RealWorld Case Study of a Restructured Wholesale Power Market (with attached energy region assignments)
(pdf,29K).
Due: Thursday, January 29, 2009, 5:30pm.
Required Readings:

** Power Market Restructuring: Current Context and Historical Events (Lecture Slides)
(pdf,1.5M) ONLINE/CLASS PRESENTATION

** Lecture Notes on Kirschen/Strbac, Chapter 1: Introduction
(pdf,360K) ONLINE/CLASS PRESENTATION
 ** Brennan et al., Part I (Chapters 14): How the Industry Got Here, pp. 145, TEXTBOOK
 ** Kirschen/Strbac Chapter 1: Introduction, pp. 19, TEXTBOOK
 ** F. Huntowski, N. Fisher, and A. Patterson, Embrace Electric Competition or it's Déjà Vu All Over Again
(pdf,586K),
The Northbridge Group, October 2008, Sections IIII, pages 130, ONLINE
II. Microeconomic Basics for Power Markets
A. Market Principles and the Theory of the Firm
 Required Readings:

** L. Tesfatsion,
Market Organization with PriceSetting Agents,
(Notes,html,8K)
and
(Slides,pdf,100K)
ONLINE/CLASS PRESENTATION

** L. Tesfatsion, Market Basics for PriceSetting Agents
(pdf,422K). ONLINE/CLASS PRESENTATION

** L. Tesfatsion, Illustration of Demand & Supply Schedule Construction
(pdf,168K). ONLINE/CLASS PRESENTATION
 ** Kirschen/Strbac, Chapter 2 (Sections 2.12.3 and 2.5), pp. 1133 & 3947, TEXTBOOK

** Lecture Notes on Kirschen/Strbac, Chapter 2 (Section 2.2): Fundamentals of Markets
(pdf,197K). ONLINE/CLASS PRESENTATION

** Lecture Notes on Kirschen/Strbac, Chapter 2 (Sections 2.3 & 2.5): Theory of the Firm
(pdf,417K). ONLINE/CLASS PRESENTATION
B. Strategic Market Behavior (Game Theory)
 Required Reading:

** L. Tesfatsion,
Game Theory: Basic Concepts and Terminology
(pdf,34K). ONLINE/CLASS PRESENTATION
C. Markets, Risks, and Contracts
 Required Readings:
 ** Kirschen/Strbac, Chapter 2 (Section 2.4): Markets, Risks, and Contracts, pp. 3329, TEXTBOOK

** Lecture Notes on Kirschen/Strbac, Chapter 2 (Section 2.4): Markets, Risks, and Contracts
(pdf,295K). ONLINE/CLASS PRESENTATION
III. Optimization Basics for Power Markets
A. Introduction to Constrained Optimization
Required Readings:

** L. Tesfatsion, Optimization Basics for Electric Power Markets
(pdf,729K). ONLINE/CLASS PRESENTATION
 Remark: These notes on optimization use basic vector/matrix notation and concepts (e.g., vector multiplication, multiplication of a matrix by a vector, and transposing of vectors and matrices). If you need a review of these concepts, or are new to these concepts, you should study the following "Appendix A" materials (sections A.1A.5) with care. A mastery of basic vector/matrix concepts is essential for both economists and engineers.

** Appendix A: Vectors and Matrices
(pdf,191K),
from Applied Mathematical Programming by Bradley, Hax, and Magnanti (AddisonWesley, 1977). ONLINE
Recommended Readings:
Recommended Reading (Advanced Level):
 * Ross Baldick, "Optimization for Engineering Systems (With Illustrations): Advanced Level"
(pdf,1M). ONLINE
B. Optimization Tools for Economic Dispatch
Required Readings:

** D. Kirschen, "Optimization Tools for Economic Dispatch Calculation"
(pdf,5.6M) ONLINE/CLASS PRESENTATION (SOME SECTIONS)

** G. Sheble and J. McCalley, "Cost Function Determination and Economic Dispatch Calculation: Worked Examples"
(pdf,277K),
PowerLearn Module 3, Electric Power Engineering Education, 2000. ONLINE
IV.
Operation of Restructured Wholesale Power Markets
A. Organization of Power Markets
 Required Readings:

** Kirschen/Strbac, Chapter 3: Markets for Electrical Energy, pp. 4972, TEXTBOOK

** Lecture Notes on Kirschen/Strbac, Chapter 3: Markets for Electrical Energy
(pdf,1.4M). ONLINE/CLASS PRESENTATION

** Kirschen/Strbac, Chapter 4: Participating in Markets for Electrical Energy, pp. 73104, TEXTBOOK

** Lecture Notes on Kirschen/Strbac, Chapter 4:Part 1 (Participating in Electric Power Markets)
(pdf,495K). ONLINE/CLASS PRESENTATION
B. Power Market Trading Subject to Transmission Constraints
B.1 Power System and LMP Fundamentals
 Required Readings:

** Kirschen/Strbac, Chapter 6: Transmission Networks and Electricity Markets, Sections 6.16.3.2.9 (pp. 141175), TEXTBOOK

** Lecture Notes on Kirschen/Strbac, Chapter 6:Sections 6.16.3.2.9 (pp. 141175)
(pdf,556K). ONLINE/CLASS PRESENTATION
 Recommended Readings:

* OpenSource Software for Electricity Market Research, Teaching, and Training
(html) ONLINE
 * H. Liu, L. Tesfatsion, and A. A. Chowdhury, "Derivation of Locational Marginal Prices for Restructured Wholesale Power Markets", Journal of Energy Markets, Vol. 2, No. 1, Spring 2009, 125.
 Note: An abridged 8page version to appear in the Proceedings of the 2009 IEEE Power and Energy Society General Meeting (Calgary, CA, July 2630, 2009) is available
here (pdf,240K). ONLINE

* L. Tesfatsion, Auction Basics for Power Markets: Objectives and Pricing Rules
(pdf,510K),
Proceedings, IEEE Power and Energy Society General Meeting, Calgary, CA, July 2009. ONLINE
 * E. Litvinov, "Power System and LMP Fundamentals"
(pdf,4M),
Training Materials, ISO New England, 2008. ONLINE
B.2 Bid/OfferBased Optimal Power Flow: Illustrative Experimental Findings
 Required Readings:

** L. Tesfatsion, "StressTesting U.S. Wholesale Power Market Designs Via AgentBased Modeling"
(pdf,2M) ONLINE/CLASS PRESENTATION
 Recommended Materials:

* AMES Market Package (Java): A Free OpenSource Test Bed for the AgentBased Modeling of Electricity Systems
(html) ONLINE

* H. Li and L. Tesfatsion, "The AMES Wholesale Power Market Test Bed: A Computational Laboratory for Research, Teaching, and Training"
(pdf,930K),
Proceedings, IEEE Power and Energy Society General Meeting, Calgary, CA, July 2009. ONLINE
 * H. Li, J. Sun, and L. Tesfatsion, "Dynamic LMP Response Under Alternative PriceCap and PriceSensitive Demand Scenarios" (with Hongyan Li and Junjie Sun)
[
(paper,pdf,465K),
(slides,pdf,1M)],
Proceedings, IEEE Power and Energy Society General Meetings, CarnegieMellon University, Pittsburgh, July 2024, 2008. ONLINE
C. Market Power Mitigation
 Required Readings:

** A. Somani and L. Tesfatsion, "An AgentBased Test Bed Study of Wholesale Power Market Performance Measures"
(pdf,2.8M),
IEEE Computational Intelligence Magazine, Vol. 3, No. 4, November 2008, 5672. ONLINE
 Recommended Materials:
 * Paul Twomey, Richard Green, Karsten Neuhoff, and David Newbery, “A
review of the monitoring of market power: Possible roles of TSOs in
monitoring for market power issues in congested transmission systems”
[
(Working Paper,pdf,664K),
(Slides,897K)],
05002 WP, Center for Energy and Environmental Policy Research,
March 2005. ONLINE
D. RealWorld Examples: Policy Concerns
 Required Readings:

** Brennan et al., Chapter 5: The California Crisis, pp. 4658, TEXTBOOK

** Brennan et al., Chapters 69 and 1314 (Basic RealWorld Policy Issues), pp. 61105 and 136158, TEXTBOOK
 ** F. Huntowski, N. Fisher, and A. Patterson, Embrace Electric Competition or it's Déjà Vu All Over Again
(pdf,586K),
The Northbridge Group, October 2008, Section IV, pages 3171, ONLINE
V. Financial and Operational Risk Management
A. System Reliability
 Required Readings:

** Brennan et al., Chapters 1012, pp. 116135, TEXTBOOK

** Kirschen/Strbac, Chapter 5: System Security and Ancillary Services, pp. 105140, TEXTBOOK
B. Financial Transmission Rights
 Required Readings:

** Kirschen/Strbac, Chapter 6 (Section 6.3.5): Financial Transmission Rights, pp. 191204, TEXTBOOK
VI. Investment for the Future
A. Investment in New Generation
 Required Readings:

** Kirschen/Strbac, Chapter 7: Investing in Generation, pp. 205226, TEXTBOOK
B. Investment in New Transmission
 Required Readings:

** Kirschen/Strbac, Chapter 8: Investing in Transmission, pp. 227264, TEXTBOOK

** California Independent System Operator (CAISO), 2004, Transmission economic assessment methodology (TEAM),
2004
(pdf,1.4M),
Executive Summary (pp. ES1 through ES25), Chapter 1:Overview of Transmission Planning and Siting Process (pp. 11 through 110), and Chapter 2:Quantifying Benefits (pp. 21 through 221). ONLINE
VII. Environmental Issues
A. Emission Control
 Required Readings:

** Brennan et al., Chapter 15, pp. 159172, TEXTBOOK
B. Potential for "Green Power"
 Required Readings:

** Brennan et al., Chapter 16, pp. 173186, TEXTBOOK
VIII. Future Prospects for Restructuring
 Required Readings:

** Brennan et al., Chapter 17, pp. 187197, TEXTBOOK
 ** F. Huntowski, N. Fisher, and A. Patterson, Embrace Electric Competition or it's Déjà Vu All Over Again
(pdf,586K),
The Northbridge Group, October 2008, Section V, pages 7275, ONLINE