Fundamentals of Power System Economics

“Where economic theory meets the physics of electricity—everything you need to understand why power markets are unlike any other.”
—Jesse Jenkins, Princeton University

“Fundamentals of Power System Economics caters to a wide diversity of students; it can speak to economists and engineers alike.”
—François Bouffard, McGill University

“Perfectly bridges principles of economics with the power system.”
—Chongqing Kang, Tsinghua University

Understand competitive electricity markets in a decarbonizing energy landscape

Designing successful electricity markets requires mastery of both power systems engineering and market economics. Now in its third edition, Fundamentals of Power System Economics explains competitive market principles while contrasting them against the monopoly model as a reference framework. Written by two leading researchers in power system economics, this new edition addresses markets where carbon-free generation predominates.

This edition adds coverage of decarbonization economics, government market interventions, and market clearing with high renewable penetration. New material addresses transmission investment cost allocation, generation investment challenges in energy-only markets, and system operator tools including SCED and SCUC. A new chapter on retail markets covers prosumer interactions, flexible consumers, and energy equity.

The book also includes:

• Reorganized structure covering fundamental principles, short-term operational economics, and long-term investment economics across three distinct parts
• Detailed analysis of wholesale market structures including demand-side bidding mechanisms and examples showing different renewable generation proportions
• Coverage of transmission network integration with system operator responsibilities and optimal power flow methodologies explained in monopoly contexts
• Discussion of retail electricity tariffs for residential and commercial consumers alongside emerging prosumer business models and flexibility services
• Extensive end-of-chapter exercises and discussion points designed to reinforce concepts and enhance understanding of complex market dynamics

Designed for graduate and undergraduate students in electrical and power engineering, this book serves power system engineers, operators, planners, and policymakers working in deregulated environments. Fundamentals of Power System Economics provides the analytical foundation needed to navigate electricity markets during the transition to low-carbon generation.