ELECTRICITY MARKETS AND ECONOMICS OF RENEWABLE GENERATIONS

The aim of this course is to provide students with the knowledge and analytical tools needed to understand and evaluate the economic principles underlying modern power systems with high penetration of generating plants based on renewable energies, with a specific focus on market dynamics, pricing mechanisms, and investment strategies within the context of the Italian energy market.

Knowledge and Understanding:

Upon successful completion of the course, students will be able to: 

Understand and apply key economic principles related to power systems, including microeconomic theories, supply and demand, and market structures. 

Analyze the impact of liberalization and regulatory changes in the electricity market, with a focus on the Italian case study. 

Assess the economic and operational factors influencing the production costs of generating power plants and the optimal power flow in the grid. 

Examine market equilibrium, price volatility, and risk management strategies within a pool market. 

Evaluate investment decisions in transmission and generation, considering the architecture of electricity markets and reserve optimization.

Making Judgements:

Students will develop the ability to: 

Critically assess the economic dispatching strategies and their implications for market efficiency and equilibrium. 

Evaluate the performance of different market structures, including monopolies, oligopolies, and competitive markets, particularly in the context of game theory. 

Make informed decisions regarding investments in energy infrastructure, considering the balance between market incentives and regulatory constraints.

Communication Skills:

Students will be able to:

Communicate complex economic concepts related to power systems to both specialist and non-specialist audiences.

Engage in discussions on the implications of market designs, such as pool markets and ancillary services, on the stability and efficiency of the energy market.

Present and justify investment strategies and risk management approaches in the context of price volatility in energy markets.

Learning Skills:

By the end of the course, students will be able to:

Identify and analyze the main economic variables and models that influence power systems.

Apply economic theories to simulate and predict market behaviors, including price setting, competition, and investment returns.

Evaluate the impact of grid infrastructure on market operations and the broader implications for energy policy and market regulation.

Understand the structure and operation of the Italian energy and ancillary services markets, including the factors that drive unbalancements and pricing in electricity tariffs.

Lecturing is used to convey knowledge and it is organized as follows:

1)  the lecture notes are outlined— first major points, then the minor points that elaborate on or explain each major point;

2) relevant, concrete examples, in advance of the lecture, selecting examples familiar and meaningful to the students are provided;

3) students are allowed to stop the lecture to ask relevant questions, make comments, or ask for review;

4) intersperse periodic summaries within the lecture.are considered;

5) lectures start with a question, problem, current event, or something that just grabs the students’ attention;

6) active learning techniques are used (technological aids, such as multimedia presentations);

 7) simulations sessions are used to check and grasp the theoretical concepts. 

Cultural and Curricular Prerequisites

1. Foundational Knowledge in Electrical Engineering:

• Power Systems: Students should have a thorough understanding of electrical power systems, including knowledge of power generation, transmission, and distribution. This includes familiarity with the basic components such as generators, transformers, transmission lines, and load characteristics.

2. Basic Knowledge of Microeconomics:

• Economic Principles: Students should have an introductory understanding of microeconomic concepts, such as supply and demand, market equilibrium, and consumer behavior.

3. Analytical and Mathematical Skills:

• Mathematics: Proficiency in advanced mathematics, particularly in calculus, linear algebra is required to handle the quantitative aspects of economic modeling and power systems analysis.
• Optimization Techniques: Knowledge of optimization methods, including linear programming and other techniques used in economic dispatch and optimal power flow, is important.

4. Background in Power Electronics:

• System Integration: Basic concepts of integrating renewable energy sources into power grids, including the challenges associated with inverter-based systems.

Additional Recommendations:

• Previous Coursework: Completion of undergraduate courses in electrical power systems and basic economics is strongly recommended.
• Programming Skills: While not mandatory, experience with software tools for power system simulation (e.g., MATLAB, Simulink, PowerWorld) and economic analysis can be advantageous.

These prerequisites ensure that students have the necessary background to successfully engage with the course, which combines advanced topics in electrical engineering with economic analysis of power systems and markets.

1. Introduction to the Economics of Electric Systems

Abstract: This lesson provides an overview of the economic principles applied to electrical systems, with an introduction to the impact of renewable energy on the economics of electrical systems, including costs and market integration.

2. Electricity Liberalization: The Italian Case Study

Abstract: This lesson examines the liberalization of electricity markets with a focus on the Italian case. It covers the transition from regulated to competitive markets and discusses the role of renewable energy in this context.

3. Elements of Microeconomics

Abstract: This session introduces the fundamental concepts of microeconomics, such as supply and demand, market equilibrium, and consumer behavior, with applications to electricity and renewable energy markets.

4. Consumer Theory and Elasticity

Abstract: It focuses on consumer decision-making processes and demand elasticity, exploring how renewable energy options influence consumer choices and demand in the electricity market.

5. Production Function

Abstract: Explores the relationship between input and output in electricity generation, comparing conventional power plants with renewable energy sources and addressing the challenges of variable renewable generation.

6. Production Costs of Power Plants

Abstract: Examines the cost structures of different energy generation technologies, with a special focus on the economic analysis of renewable energy sources versus traditional generation.

7. Supply Curve and Perfect Competition

Abstract: Analyzes how the supply curve is formed in perfectly competitive electricity markets, including the influence of increasing renewable energy on market dynamics.

8. Economic Dispatch and Power Flow Optimization

Abstract: Covers methods to optimize the dispatch of power generation units, incorporating the complexities introduced by the variability and uncertainty of renewable energy sources.

9. Network Impact on Market Equilibrium

Abstract: Discusses how network limitations and infrastructure affect market equilibrium, focusing on the challenges posed by large-scale integration of renewable energy into the grid.

10. Pool Market and Losses

Abstract: Explores the structure and functioning of electricity pool markets, analyzing how losses are managed, especially in systems with a significant share of decentralized renewable generation.

11. Price Volatility and Risk Management in a Pool Market

Abstract: Examines the factors contributing to price volatility in electricity markets, particularly with renewable sources, and discusses strategies to manage associated risks.

12. Monopoly

Abstract: Introduces monopolistic market structures and analyzes how monopolistic behaviors may influence or be influenced by the adoption of renewable energy in electricity markets.

13. Elements and Applications of Game Theory

Abstract: Provides an introduction to game theory and its applications in electricity markets, focusing on the strategic interactions between traditional and renewable energy producers.

14. Oligopoly: Duopolistic Models

Abstract: Examines oligopolistic market structures, focusing on duopolistic competition in electricity markets and the strategic role of renewable energy companies in such contexts.

15. Transmission Investments

Abstract: Discusses the economic considerations and challenges of transmission infrastructure investments, emphasizing the needs for integrating renewable energy sources into the grid.

16. Generation Investments

Abstract: Focuses on the economic analysis of investments in energy generation, comparing the risks and returns of investments in traditional energy projects versus renewable ones.

17. Electric System Architecture and Reserve Optimization

Abstract: Examines the architecture of modern electric systems, with a focus on optimizing reserves and ensuring reliability in grids with high renewable energy penetration.

18. Italian Markets

Abstract: Provides an overview of the structure of the Italian electricity market, focusing on the role of renewable energy and the regulatory framework that supports its integration.

19. Italian Energy Markets

Abstract: Expands the analysis of the Italian energy market, discussing the evolution and future prospects of renewable energy sources and their impact on market operations and policies.

20. Italian Ancillary Services Markets

Abstract: Analyzes the Italian ancillary services market, focusing on the participation of renewable energy in providing services such as frequency regulation and voltage support.

21. Imbalances

Abstract: Discusses the causes and management of imbalances in electricity markets, particularly in grids with a high share of variable renewable sources.

22. Electric Bill and Tariffs

Abstract: Explores the structure of electricity tariffs and bills, examining how the integration of renewable energy affects pricing strategies and costs for consumers, including the introduction of dynamic pricing.

Learning materials are resources that the professor uses to help students achieve the learning outcomes of your course. Specifically, the following materials are used:
1) Reference books (see list below).
2) Lecture notes (provided by the professor).
3) PowerPoint presentations (provided by the professor).

- Oral exam: 2 or 3 questions on the topics listed in the program,

- a final written report on a specific technical or economic problem of the electricity system

Important note: Verification of learning can also be carried out electronically, should the conditions require it.