The electric power industry is undergoing the most profound technical,
economic and organisational changes since its inception some one hundred
years ago. This paradigm change is the result of the liberalisation
process, stipulated by politics andfollowedupbyindustry.
Formanyyearstheelectricpowerindustrywasch- acterized by a vertically
integrated structure, consisting of power generation,
transmission/distributionandtrading.
Theliberalisationprocesshasresultedinthe
unbundlingofthisorganizationalstructure. Nowgenerationandtradingareorg-
ised in separate business entities, subject to competition, while the
transm- sion/distribution business remains a natural monopoly. Since the
trading of el- tric energy happens on two levels, the physical level and
the contractual level, it has to be recognized that these two levels are
completely different. However for understanding the electricity market
as a network based industry both levels have to be considered and
understood. The fundamental properties of electric energy
areasfollows: -
Electricityalwaysneedsanetworkfortransportationanddistribution. -
Electricitycannot be storedin asubstantialamount, hence production andc-
sumptionhavetobematchedateachinstantoftime. - The physical transport of
electricity has nothing to do with the contracts for
tradingwithelectricity The role of the electric network is of prime
importance within the electric energy business. Its operation is
governed by physical laws. The electric network has a fixed structure
consisting of different voltage levels; the higher levels are for
transmission purposeswhereasthe lower levelsareused for the
distributiontasks. Eachnetworkelementhasafinitecapacity,
limitingtheamountofelectricitytobe transported or distributed. As a
consequence of the liberalisation process the - eration of the networks
has beenpushedcloser towardsitstechnicallimits. Hence
thestressonthesystemisconsiderablybiggerthaninthepast. Theefficientuseof
all network elements is of prime interest to the network operator
because the cost constraints have also become much tighter than in the
past.
