Department of Electrical and Computer Engineering

Market Design and Gaming in Competitive Electricity Markets, Shmuel S. Oren, Professor of Industrial Engineering and Operations Research, University of California at Berkeley

Electrical and Computer Engineering

Information Infrastructure Institute (ICUBE) and F. Wendell Miller Distinguished Lecture Series, 2004-2005

Shmuel S. Oren, Professor of Industrial Engineering and Operations Research, University of California at Berkeley

2/4/2005, 1-2 p.m.  Alliant Energy-Lee Liu Auditorium

Lecture Title:

Market Design and Gaming in Competitive Electricity Markets

Abstract:

Over the last decade the electric power industry in the US and other parts of the world has undergone a massive transformation  from a vertically integrated and government regulated monopoly to a system were market forces play a central role in determining whole sale prices and dispatch.  Key aspects of such restructuring are the creation of separate entities that control the transmission system and opening up that system to competitive use by independent merchant generators.  While the composition of restructured electricity systems varies around the world  and even within the US the basic concept is similar. That is, creation of products and markets that will replace the traditional command and control approach to dispatch and planning with a decentralized system where supply and demand, pricing and investment decisions are based on commercial considerations of independent market entities.  For such a decentralized approach to work it is essential that market rules are properly designed. The objective of such design is to create incentives such that when each market participant acts in its own selfish interest the outcome for the system as a whole replicates the results of a central social planning process with perfect information.  Unfortunately, attempts to oversimplify the market designs driven in many cases by political expediency and compromise have lead to faulty designs and bad outcomes. This talk will review the basic elements of electricity markets and highlight specific market design flaws concerning congestion management and reserves markets.  Experiences with faulty market designs and remedies will be discussed in the context of the California and ERCOT electricity market designs

Speaker Biography:

is Professor of Industrial Engineering and Operations Research at the University of California at Berkeley. He is the Berkeley site director of  the Power System Engineering Research Center (PSERC). His academic research and consulting activities over the last twenty five years focused on the economics, planning and operations of electric power systems. He has been a consultant to various private and government organizations on electricity market design issues, including EPRI, the Brazilian Energy Regulatory Commission, the Alberta Energy Utility Board, the Polish System Operator, the Peruvian Energy Regulatory Commission, and to the California ISO. He also testified before FERC at technical workshops concerning the SMD NOPR and was a member of the DOE National Transmission Grid Study task force. Over the last four years he has been a Senior Adviser to the Market Oversight Division of the Public Utility Commission of Texas and has been involved in the ongoing Texas electricity market reform. He holds a Ph.D in Engineering-Economic Systems from Stanford university and is a Fellow of the IEEE and of INFORMS.