Table of Contents

Preface xi

Acknowledgments xv

Figure Citations xvii

About the Author xix

1. Overview 1

1.1 The Power Delivery Chain in a Vertically Integrated Utility 1

1.2 The Power Delivery Chain in a Market Environment 3

2. Energy, Load, and Generation Technologies 7

2.1 Energy, Power, and their Measurements 7

2.2 Load 14

2.3 Generation Technologies 21

3. The Grid 49

3.1 Fundamentals: Load, Generation, and Alternating Current 49

3.2 Grid Equipment 56

3.3 Grid Reliability and Contingency Requirements 64

3.4 Grid Configuration 67

3.5 Grid Operations 72

3.6 Blackout August 14, 2003 76

4. Short-Term Utility Planning 81

4.1 Planning and Execution of Dispatch: Day-Ahead Planning Through Real-Time Delivery 81

4.2 Day-Ahead Demand Forecasting: Load and Ancillary Service Requirements 84

4.3 Least-Cost Dispatch in a Single Control Area: A Simple Model 89

4.4 A Solution Using Profit Maximization 95

4.5 Least-Cost Dispatch in a Single Control Area with Operating Constraints 99

4.6 Least-Cost Dispatch in a Single Node with Spinning Reserve and Regulation 111

4.7 Least-Cost Dispatch in a Network 113

4.8 Real Time 120

5. Long-Term Utility Planning 122

5.1 Project Development 122

5.2 The Planning Process 127

5.3 Long-Term Load Forecasting 129

5.4 A Simplified Look at Generation Capacity Additions 131

5.5 Generation Additions and Retirements Within a Single Control Area 143

5.6 Generation Additions and Retirements with Transmission to a Single Control Area 147

5.7 Generation Additions and Retirements and Transmission Additions Within a Network 148

5.8 Reserve Reuqirements 151

6. Midterm Utility Planning 152

6.1 Informational Requirements 152

6.2 Formulation of the Optimization Problem 156

7. A Market Environment 161

7.1 Principles and Architecture 161

7.2 Short-Term Market Design: Day-Ahead Scheduling Through Real-Time Delivery 164

7.3 Long-Term Market Design: No Clear Solutions 170

7.4 Midterm Market Design 173

8. Asset Management in Short-Term Markets 180

8.1 Retailers 180

8.2 Power Producers 183

8.3 Integrated Energy Companies 189

9. Investment Analysis: Long-Term Planning in a Market Environment 192

9.1 Investment Setting in Utility and Market Environments 192

9.2 Project Analysis for a Merchant Plant 193

9.3 Power Purchase Agreements (Long-Term Contracts) 202

10. Risk Management in the Midterm Markets 211

10.1 Retailer Risk 211

10.2 Power Producer Risk 214

10.3 A Quick Risk Primer in Statistics for Risk Management 215

10.4 Risk Management in Midterm Markets: Retailers 229

10.5 Risk Management in Midterm Markets: Power Producers 252

10.6 Risk Management in Midterm Markets: Integrated Electricity Suppliers 274

11. The California Experience 278

11.1 Market Fundamentals 279

11.2 Short-Term Market Structure: The CALPX, CAISO, and Other Market Participants 281

11.3 Fatboy, Get Shorty, Ricochet, and Death Star 286

11.4 Market Contrast: PJM and California 288

Bibliography 291

Index 294

About the Author

Arthur Mazer, PhD, MBA, is Manager of Forward Transactions Planning at Southern California Edison, where he oversees the risk assessment of SCE's power, gas, and customer portfolio, as well as valuation and selection of power and gas contracts. He previously held positions at Electrabel, Progress Energy, and Entergy Power Marketing Corp. Additionally, he was visiting assistant professor at Utah State University and a lecturer at Singapore Polytechnic, both in the Department of Mathematics.

Reviews

"…'an ideal reference for professionals and private service sectors.' Thus it is for power industry professionals." (CHOICE, September 2007) "...a comprehensive book by an insider..." (Electrical Apparatus, July 2007)