This comprehensive and up-to-date book explains the economic rationale behind the production, delivery and exchange of electricity. Creti and Fontini explain why electricity markets exist, outlining the economic principles behind the exchange and supply of power to consumers and firms. They identify the specificities of electricity, as compared to other goods, and furthermore suggest how markets should be optimally designed to produce and deliver electricity effectively and efficiently. The authors also address key issues, including how electricity can be decarbonized. Written in a technical yet accessible style, this book will appeal to readers studying power system economics and the economics of electricity, as well as those more generally interested in energy economics, including engineering and management students looking to gain an understanding of electricity market analysis.

Explains the economics of electricity at each step of the supply chain: production, transportation and distribution, and retail.

Part I - Introduction to Energy and Electricity 1. Basic Principles, Definitions and Unit Measures 2. Introduction to Electricity: Brief History of the Power Industry Part II - The Basic Design of Electricity Systems and Markets 3. Electricity Systems and the Electricity Supply Chain 4. The Four Market Designs of the Electricity System 5. Energy Products and the Time Dimension of Electricity Markets 6. Some Principles of Electricity Sector Regulation Part III Simplified Isolated Markets without Network Congestion 7.Load and Power Generation 8. The Centralized Solution of Optimal Dispatching 9. Welfare Maximization with Time-Varying Load 10. The Market Solution to Optimal Dispatching 11. Balancing Markets Part IV Competition in Wholesale Electricity Markets 12. Wholesale Market Competition 13. Market Power in Electricity Markets Part V Introducing Transmission Networks: Network Congestion and Electricity Import-Export 14. Electricity Transmission: Basic Principles 15. Meshed Networks and Congestion 16. Transmission Pricing in Practice 17. From Nodal Prices to Transmission Capacity Expansion 18. Transmission Rights and Price Risk Hedging Part VI Economics of Electricity Retail Markets 19. Retail Competition: Supplying Electricity to Final Consumers 20. Assessing the Benefits of Retail Competition Part VII Investing in Power Generation 21. Optimal Investment in Power Generation 22. Energy-Only Markets vs. Markets with Capacity Remuneration Mechanisms 23. Analysis of Capacity Remuneration Mechanisms Part VIII Environmental Challenges and the Future of Electricity Markets 24. Global Warming and the Electricity Markets 25. Renewable Energy Sources and Electricity Production 26. The Integration of Renewable Energy Sources in the Electricity System 27. Smart Grids References Index