Workably Competitive Electricity Markets: Practice and Theory

Socio economic forces, development in generation technologies and environmental considerations have led over two decades ago to restructuring of the electric power systems in the US and in many systems worldwide, transforming them from vertically integrated regulated monopolies to competitive market based systems. This talk will review the basic structure and elements of the prevailing Standard Market Design adopted in the US under FERC guidance. I will also sketch the theoretical foundation underlying this design, which is based on strong convexity assumption that do not hold in practice. I will then describe alternative approaches and recent developments focusing on price formation that attempt to address distortions due to non convexities. These distortion have become more prominent and problematic due to the increased share of intermittent renewable resources in the electricity supply mix.