The Economic Value Of Reliability In Deregulated Electricity Markets

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The goal of this dissertation is to present an analytical framework for determining the economic value of both operating reliability and system adequacy in a mutually consistent manner. This is made possible using a new stochastic form of Security Constrained Optimal Power Flow, the Cornell SuperOPF, that determines the amount of generating capacity needed for reliability endogenously. The first application shows how the SuperOPF can be used to evaluate System Adequacy when wind capacity is added to a network. Although many studies focus exclusively on how wind generation lowers operating costs, this analysis also considers the capital costs of maintaining Financial Adequacy and includes the "missing money" that is generally paid through a Capacity Market. The results show why the net benefits from making an investment in wind capacity and/or upgrading a tie line are very sensitive to 1) how well the variability of wind generation is accommodated on the network by storage, and 2) how the amount of money required to maintain the Financial Adequacy of conventional generators is determined. A second application uses the SuperOPF to determine the economic value of individual transmission lines, and how this value changes when wind capacity is added to a network. A conventional economist's view of transmission lines is that their purpose is to transfer real power from inexpensive sources to expensive sinks. This concept works reasonably well when the topology of a network is radial, but not when it is meshed. The redundancy in a meshed network is important for maintaining reliability and the analysis shows why the conventional method of valuing a iii transmission upgrade as the change in congestion revenue (the line flow times the nodal price difference) is misleading. The analysis distinguishes between congestion revenues for 1) transferring energy, and 2) maintaining reliability, and also determines the capital cost of the generating capacity needed for reliability when wind capacity is added. Using storage to mitigate wind variability is shown to be an effective alternative to upgrading a tie line. iv

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Electricity Markets; Energy Economics; Reliability


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Union Local


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Mount, Timothy Douglas

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Thomas, Robert John
Schuler, Richard Edward

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Regional Science

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Ph. D., Regional Science

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Doctor of Philosophy

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Government Document




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dissertation or thesis

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