40220692 (Introduction on Electricity Market)

40220692 (Introduction on Electricity Market)

Course Name: Introduction on Electricity Market

Course Number: 40220692

Program: Undergraduate program

Type: Optional

Credits: 2

Term Offered: Fall

Prerequisite(s): Micro-Economics, Power System Analysis, Dispatch Automation, Power Plant Engineering, Optimization Theory.

Suitable for undergraduate of Electrical Engineering

Instructor(s): Qing Xia


Introduction on Electricity Market. Intramural Lecture Sheets (in Chinese)


Daniel Kirchen, Fundamentals of Power System Economics, China Electric Power Press 2007.

N. Gregory Mankiw. Principles of Economics (4th Edition), Peking University Press,2006.

Arthur R. Bergen and Vijay Vittal,Power Systems Analysis (2nd Edition), Pearson Education Asia Limited and China Machine Press, 2007.

Frona Woolf. Global Transmission Expansion: Recipes For Success . China Electric Power Press, 2007.

Steven Stoft, Power System Economics: Designing Markets for Electricity, IEEE/Wiley, 2002

Course Description:

 The course is about the foundation of electricity market theory, key terminologies of electricity market, and substantial ideas as electricity market designers. At the beginning of the course, the fundamentals of micro-economics are introduced. Then it covers the scale of market infrastructure, transaction architecture, and organization configuration of electricity market. Different types of market including Long-term Contract Market, Day-Ahead Market and Spot Market are introduced respectively. Another important part of the course is electricity price, such as pricing model and pricing mechanism. Last but not least, the latest research outcome of market regulation and Evaluation Index System are introduced.

Course Objectives and Outcomes:

 Numbers in brackets are linked to department educational outcomes

1.Students should understand the background of electricity de-regulation and the operation mechanism of electricity market. [1, 2]

2.Students would get in touch with the latest research outcome of electricity market in China and all over the world. [10]

3. Students are familiar with a certain number of terminologies, which will be used repeatedly in the successive learning and studying. [5]

4.Students are familiar with various intuitive ideas in electricity market, e.g. incentives compatibility perspective, competitive perspective, and mechanism designing perspective [3, 5, 11]

Course Topics:

1.Introduction, including the origin of Electricity Market Reform, the theoretical architecture of Electricity Market and the challenges of Electricity Market.

2. Fundamentals of Economics, such as de-regulation, demand, supply, equilibrium, resource optimal allocation, competition, incentive compatibility, elasticity, market power, market failure, financial basic knowledge etc.

3. The Structure of Electricity Market, introduce different types of market such as vertically integration, single buyer, wholesale market and retail market.

4. The Transaction Architecture of Electricity Market.

5. The Organization of Electricity Market.

6. The Transaction Pattern of Electricity Market, including electricity pool, bi-lateral transaction.

7. Contract Market, mainly including anniversary contract, monthly contract.

8.Day-Ahead Market, including the aim, designing principles, bidding mechanism and mathematical model and algorithm of Day-Ahead Market. Introduction of the practice of Day-Ahead Transaction in East-China Electricity Market.

9.Spot Market, including the aim, designing principles, bidding mechanism and mathematical model and algorithm of Spot Market. Introduction of Congestion Management.

10.Ancillary Service Market, including the cost-benefit analysis of Ancillary Service, AGC market, rotating reserve market, reactive power market, black-start service market.

11.Transmission Market.

12.The Model of Electricity Price and Price Mechanism, including System Marginal Price (SMP) and Pay As Bid (PAB), introduction of Local Marginal Price (LMP).

13. Financial Market, including transaction of generation rights, electricity options and futures.

14.The Coordination Mechanism between different Contract Markets, Day-Ahead Market, Spot Market and Ancillary Service Market.

15.Electricity Regulation, including the regulation of generation and transmission, the regulation index such as HHI and Lerner Index, regulation methods.

16.Assessment Index System of Electricity Market, including evaluation index of Efficiency, Externality, Fluctuation of the Market.

Experiment(s): NULL


l  Design the Mechanism to suppress the operation risk of Power System brought about by the market competition.

  Understand the impact of market competition, use the knowledge learned in Coordination between different Markets to design the mechanism to suppress the operation risk of Power System.

l  Design the Bidding Mechanism of Spot Market to inspire the market participants to Bid rationally in the Day-Ahead Market

  Use knowledge learned in Day-Ahead Market and Spot Market to design and bidding mechanism of Spot Market to inspire the market participants to bid rationally in the Day-Ahead Market.

Course Assessment:

   Homework measures, 20 points.

   Final exam score, 80 points.