Date of Award

5-2012

Embargo Period

9-25-2012

Degree Name

Doctor of Philosophy (PhD)

Department

Engineering and Public Policy

Advisor(s)

Marija Ilic

Abstract

Motivated by the overall challenge of ensuring long-term sustainable electricity service, we view this challenge as a long-term decision making problem under uncertainties.

We start by recognizing that, independent of the industry organization, the uncertainties are enormous and often exogenous to the energy service providers. They are multi-dimensional and are result of fundamental drivers, ranging from the supply side, through the demand side, to the regulatory and policy sides. The basic contribution of this thesis comes from the recognition that long-term investments for ensuring reliable and stable electricity service critically depend on how these uncertainties are perceived, valued and managed by the different stakeholders within the complex industry organization such as the electric power industry. We explain several reasons why price signals obtained from current short-term electricity markets alone are not sufficient enough for long-term sustainable provision. Some enhancements are presented in the thesis to improve the short-term electricity market price signals to reflect the true cost of operation.

New market mechanisms and instruments are needed to facilitate the stakeholders to better deal with long-term risks. The problems of ensuring long-term stable reliable service in the sense of the traditional resource adequacy requirements are revisited in both the restructuring industry and regulated industry. We introduce a so-called Stratum Electricity Market (SEM) design as the basic market mechanism for solving the problem of long-term reliable electricity service through a series of interactive multi-lateral market exchange platforms for risks communication, management and evaluations over various time horizons and by the different groups of stakeholders. In other words, our proposed SEM is a basic IT-enabled framework for the decision making processes by various parties over different time. Because of the uniqueness of electricity as a commodity, the values for the same amount of energy during different time and at different location can vary dramatically. Moreover, for the same hour, the values for the same amount of power at base load level or at peak load level are different due to the different generation technologies and other non-convex constraints like unit commitment. The multiple market products at zonal/nodal levels with different time horizon and time of use categories are designed to reflect more realistic demand and supply conditions at various temporal and spatial granularities. Detailed market rules, rights and regulations (3Rs) concerning the sub-markets interactions, product hierarchy and financial settlements are also examined.

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