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Politecnico di Torino
Academic Year 2007/08
01IJCGA
Economics of electrical systems
Master of science-level of the Bologna process in Electrical Engineering - Torino
Teacher Status SSD Les Ex Lab Tut Years teaching
Bompard Ettore Francesco ORARIO RICEVIMENTO PO ING-IND/33 36 20 0 0 8
SSD CFU Activities Area context
ING-IND/33 5 B - Caratterizzanti Ingegneria elettrica
Objectives of the course
The course is aimed in providing the basic notions needed for the comprehension of the economic issues related to the electro- energetics. The basic knowledge about the operation of competitive electricity markets and the financial analysis of the investment project in the electro-energetic field will be presented.
Expected skills
The student, after the completion of the course, will be able to understand the basic concepts of the economic analysis and to apply them to the financial analysis in the electro-energetic sector; he or she will know the structure and operation of competitive electricity markets and be able of understanding and interpreting the related phenomenon.
Prerequisites
Basic background in power systems analysis (power flow equations, line modelling, power-frequency regulation, voltage regulation)
Syllabus
1. ELECTRICITY AS A FORM OF ENERGY
' What are power and energy
' Historical background
' Economic overview
' Demand side in electricity
' Supply side in electricity
' Price structure for the electricity

2. MICROECONOMICS AND INDUSTRIAL ORGANIZATION
' What is economics?
' Basic economic laws
' Basic definitions (cost, revenue, profit')
' Objectives of a firm
' Demand Elasticity
' Equilibrium point and associate economic metrics
' Market models
3. SUPPLY SIDE OF ELECTRICITY: POWER PLANTS TECHNOLOGIES, PRODUCTION COSTS AND BIDS
' Generation Technologies
' Generation Cost Components
' Cost Comparison of Various Generation Technologies
' Generation Cost Modelling
' Optimal offer of Thermal Plants in Power Market
' Unit commitment

4. MARKET IMPLEMENTATION IN THE ELECTRICITY INDUSTRY
' Basic features of electricity as a commodity
' Economy, electricity and development
' Competition vs. regulation in electricity markets
' Levels of liberalization
' Players, markets and goods (commodities)
' Ancillary services
' Reference structures for competitive markets
' Price fixing mechanism
' Liberalization in the EU and Italy
' Italian electricity market - IPEX


5. NETWORK RELATED COSTS IN COMPETITIVE ELECTRICITY MARKETS
' Network costs definition
' Embedded (capacity) costs
' Loss costs
' Congestion costs
' Transmission pricing
' Embedded (capacity) cost allocation
' Postage stamp
' Zonal allocation
' MW-mile

6. OPTIMIZATION PROBLEMS AND CONGESTION MANAGEMENT
' Optimization Problems (OP)
o Formulation for OP
o Karush Kun Tucker conditions (KKT)
o Sensitivity interpretation of Lagrange multipliers
' Market clearing as an optimization problem
' Market clearing without considering the network constraints
' Market clearing considering the network constraints
o One shot -> LMP
o Two shot -> Uplift
' Transmission rights

7. PURCHASING ELECTRICITY ON THE MARKET

8. FINANCIAL ANALYSIS OF THE INVESTIMENTS
' What is an investment?
' Investment analysis
' Capital and interest rates
' Basic financial mathematics
' compounding
' discounting
' annuity
' Cash flow analysis
' Assessment of the convenience of the investment
' Indexes for financial evaluation
Syllabus: more informations
The slides of the course are available on-line.
The professor of the course and the assistant are available for meetings with the students on appointment.
Laboratories and/or exercises
1. Technical-economic aspect of electrical energy
2. Microeconomics and economic metrics
3. Market clearing without network constraints
4. Market clearing with network constraints
5. Financial analysis of investments
Bibliography
1. S. Stoft - Power System Economics: Designing Markets for Electricity ' John Wiley& Sons, I edizione, Maggio 2002. ISBN: 0-471-15040-1
2. D.Kirschen, G.Strbac ' Fundamentals of Power System Economics ' Wiley, 2004. G.Rothwell, T. Gomez ' Electricity Economics ' IEEE Press, Wiley Interscience, 2003. ISBN:0-470-84572-4
3. G.Rothwell, T. Gomez ' Electricity Economics ' IEEE Press, Wiley Interscience, 2003. ISBN:0-471-23437-0
4. P. A. Samuelson, W. D. Nordhaus - Microeconomics 'McGraw-Hill/Irwin, XVII edizione, Maggio 2001.
5. Hisham Khatib ' IEE Power Series : Economic Evaluation of Projects in the Electricity Surpply Industry ' The Institution of Electrical Engineers, London, Luglio 2003. ISBN:0-86341-304-8
6. W. Sullivan, E. Wicks, J. Luxhoj. Engineering Economy. Prentice Hall; 13 edition, June, 2005 ISBN: 0131486497
7. L. Blank, A. Tarquin. Engineering Economy. McGraw-Hill Science/Engineering/Math, 5th edition, 2002 ISBN: 0072432349
Revisions / Exam
The exam consists in an oral interview on the contents of course and the practical work

Programma definitivo per l'A.A.2008/09
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