The introduction of competition into the electricity supply industry has fundamentally changed the way it works. In light of these changes this book provides a clear and comprehensive explanation of the basic principles underpinning the design and operation of modern competitive electricity markets.

Assuming no prior knowledge of economics, "Fundamentals of Power System Economics" discusses the organization of markets for electrical energy as well as the operational and investment decisions that companies participating in these markets must make.

Features include: An introduction to the relevant microeconomics concepts and the theory of the firm. An introduction to the organisation and operation of electricity markets. A clear explanation of the concepts of system security and of the markets for ancillary services. A lucid treatment of the effect of network congestion on electricity markets, including a detailed discussion of locational marginal pricing. A tutorial treatment of the issues surrounding investment in generation and transmission. Numerous illustrative examples. This is a book written by engineers, primarily for engineers, and has been designed in a textbook style with a problem and answer section at the end of each chapter to aid learning. The accessible tutorial style makes this book essential reading for both postgraduate and undergraduate students, professors and practicing engineers alike.

A new edition of the classic text explaining the fundamentals of competitive electricity markets now updated to reflect the evolution of these markets and the large scale deployment of generation from renewable energy sources The introduction of competition in the generation and retail of electricity has changed the ways in which power systems function. The design and operation of successful competitive electricity markets requires a sound understanding of both power systems engineering and underlying economic principles of a competitive market. This extensively revised and updated edition of the classic text on power system economics explains the basic economic principles underpinning the design, operation, and planning of modern power systems in a competitive environment. It also discusses the economics of renewable energy sources in electricity markets, the provision of incentives, and the cost of integrating renewables in the grid. Fundamentals of Power System Economics, Second Edition looks at the fundamental concepts of microeconomics, organization, and operation of electricity markets, market participants strategies, operational reliability and ancillary services, network congestion and related LMP and transmission rights, transmission investment, and generation investment. It also expands the chapter on generation investments discussing capacity mechanisms in more detail and the need for capacity markets aimed at ensuring that enough generation capacity is available when renewable energy sources are not producing due to lack of wind or sun. Retains the highly praised first edition s focus and philosophy on the principles of competitive electricity markets and application of basic economics to power system operating and planning Includes an expanded chapter on power system operation that addresses the challenges stemming from the integration of renewable energy sources Addresses the need for additional flexibility and its provision by conventional generation, demand response, and energy storage Discusses the effects of the increased uncertainty on system operation Broadens its coverage of transmission investment and generation investment Supports self-study with end-of-chapter problems and instructors with solutions manual via companion website Fundamentals of Power System Economics, Second Edition is essential reading for graduate and undergraduate students, professors, practicing engineers, as well as all others who want to understand how economics and power system engineering interact.