Economics of Power and Energy Systems

Course Description

Relationship between energy consumption and economic growth. Overview of the distribution of energy resources, demand, supply and trade across the world. Economics of exhaustible resources and its application to energy sector. Key concepts from the theory of the firm with application to energy sector. Energy markets - liberalisation and deregulation. Complexity of competitive electricity market. Organisation of electricity markets. Participants in electricity markets. Risks of participating in electricity markets. Types of markets and contracts. Ancillary services market. Powers systems limitations and their impacts on electricity prices. Methods for evaluating cost - effectiveness of investments. Investing in electricity production. Investing in energy efficiency improvements as a new energy source. Investing in transmission. Energy strategies in market conditions.

Learning Outcomes

  1. explain historical and actual occurrences and cause-effect relationships in the world energy market
  2. explain historical and actual occurrences and cause-effect relationships in the world energy market
  3. estimate risks and applicability of different mechanisms for reducing risks related to participation in electricity market
  4. demonstrate the impacts of physical characteristics of electricity on energy markets
  5. compare different investment options in the power system according to their cost – effectiveness in market conditions
  6. choose adequate market strategy according to the type of market participant

Forms of Teaching


Lectures will provide a theoretical background to the students.


These will be used to solve numerical examples to the students.


Specialized software will be used to model economics of the power system.

Week by Week Schedule

  1. Organization structures before and after restructruing, Vertically and horizontally integrated energy company, Competition models
  2. Application of the classical economic theory on power systems, Market organization and structures, Electricity and ancillary services market, Electricity exchange, Basics of auction mechanism
  3. Supply-demand, Elasticity, Energy pricing and interdependancies
  4. Interdependancies, Electricity as a product, RES impact on electricy price formulation, CO2 emissions and green certificates
  5. Market clearing models, Power system terms of use
  6. Energy activities legislative, Grid code, Types of ancillary services, Ancillary services providers, Ancillary services market models, Ancillary service cost
  7. Impact of power system ancillary services on electricity prices, Measurment and remuneration of ancillary services, Mandatory and commercial services, Congestion as a result of market transactions, Market power
  8. Midterm exam
  9. Economic criterias, Least-cost planning and integrated planning of resources, Demand forecasting, Optimization problems for generation mix planning
  10. Properties of energy resources, Costs and benefites of energy sources, Levelised costs of electricity, Methods for power system planning: simulation and optimization models, Enviroemntal impacts
  11. Renewables and state aid, Generation adequacy problem, Capacity Remuneration mechanisms, External costs of electricity production, Life-cycle analysis
  12. Economic models for energy projects, Financial models for energy projects, Decision making process: Multy criteria decision maknig
  13. Ancillary services and thier providers, Ancillary services in power system operation, Reserve
  14. Imbalance energy, Ancillary services cost and measuring
  15. Final exam

Study Programmes

University graduate
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Daniel S. Kirschen, Goran Štrbac (2004.), Fundametals of Power System Economics, Wiley
Steven Stoft (2002.), Power System Economics: Designing Markets for Electricity, Wiley

Associate Lecturers


Laboratory exercises

For students


ID 222569
  Summer semester
L3 English Level
L1 e-Learning
45 Lectures
15 Exercises
8 Laboratory exercises

Grading System

Very Good