The Economics of Electricity Markets

Part IIIOptimal Dispatch: The Efficient Use of Generation, Consumption and Network Resources

Hastings power house, New Zealand, ca 1915 (Source: Neil Rennie)

Suppose we have an existing stock of generation, consumption and network assets. How should that stock of assets be operated so as to maximise economic welfare? This question must be answered whether the electricity industry is operated as a vertically integrated monolithic firm with no scope for competition or as a liberalised market with decentralised decision making by a large number of competing generators and consumers. The problem becomes even more complicated when the operation of generation and consumption assets must be coordinated with physical network limits. How should we utilise a stock of generation, consumption and network assets so as to deliver the greatest economic value? These are the issues we explore in this part.