Electricity Market at America

CHAPTER 2

LITERATURE REVIEW

2.1 Electricity Market at America

There are many Electricity Distribution Service Companies in America and these Electricity companies deliver energy to millions of customers. There are U.S. markets to undergo regulatory restructuring. Yet, the common distribution networks in the markets are controlled by third-party independent system operators. The organizational structures of the market that I am studying are generally same. By emphasizing on wholesale and retailing pricing, Deregulation of Electricity has been in quite limited scope. By looking today's market of electricity deregulation, it can be clearly seen that generators and suppliers are in a competitive market operating for selling their electricity to customers. The electricity market history has been changed by deregulation and privatization.

Electricity landscape has changed because of worldwide up growing electricity demand. Electricity supplying business and electricity delivering business are separate functions and hence, in America there are a large number of these newly businesses that are increasing. Complexity of power transactions, congestion management and pricing are major parameters in the daily operation of electricity markets. Today's electricity market, the prices hasn't diverged significantly, but slightly varied during peak hours. Mostly big businesses possess high authority for selling energy at deregulated prices. Electricity supplying and electricity delivering sectors are still regulated, but have been reorganized for accommodating retail and wholesale markets. [2]In the USA, Power blackouts frequently, and especially in California where there is a high energy shortcoming owing to market regulation.

Wholesale electricity market would consist of diverse financial and commercial arrangements, such as short- term or long-term trading, various contract types in different durations, joint ventures etc. It is not the usual policy focus interesting in a market developing for any commodity. However, the special characteristics of electricity make the market more important in designing a scope for supporting competition.

2.1.1 Business Opportunity for Online Electricity Supplier Market

The main parameter of electricity market constitutes the sale of electricity to all kinds of Business sectors and Normal Households Customers. For calculating the market volume, the total consuming electricity volume (in billions of kilowatt hours, kWh) is one of the important factors, and for the market value, average prices of electricity annually.

Where families were once tied to one electricity provider, they can now compare electricity suppliers, shop around for the best prices, and purchase only as much power as they want at any one time. This means people are automatically able to save money by always being on the cheapest available tariff in their area, and by being able to select from America's most competitive electricity deals. With increasing overall power prices, tighter family budgets and a growing awareness of becoming energy efficient to cut costs, people have been increasingly turning to the Internet for information on reducing their electricity consumption and power bills. By being able to compare electricity suppliers online, families can reduce their power bills easily, without having to worry about going without essentials like heating to cut their costs.

In the US, there are two different markets for electricity sales. The largest and longest one in existence is the renewable electricity offering by competitive electricity suppliers and utilities. If the electricity market has been deregulated, customers sign up either with their local utility or with energy service provider that offers a renewable electricity product for this market. [17]

US electricity market has been governed by the state public utility commissions and Federal Energy Regulatory Commission (FERC). Although FERC is a non-government agency, it is officially organized as part of the Department of Energy, and there are many responsibilities for FERC such as to regulate the interstate electricity transmission, to regulate the wholesale electricity sales, to license and inspect hydroelectric projects, and to monitor energy companies and markets for protecting customers from market manipulation . The local utility company especially focuses to generate, distribute and retail sale the electrical power to consumers within their service territory, and therefore it is vertically integrated for more than half of the US states. Generally, these companies continue to provide energy supplying and energy delivery services, but for the consumers, they can choose one from those as they like. [17]

2.2 Different Resources for Producing Electricity in America

Until 2004, US electricity market has mainly focused on renewable resources; natural gas, oil and coal. These three are also called Fossil Fuels, Thermal power. We can define solar, geothermal, and wind technologies as the renewable resources and they usually have not affected to some changes about weather conditions such as local air pollution and climate change. The expense of electricity generation relies on the energy fuel price and the cost of generating nuclear power, hydropower and fossil-fuels. [17]Naturally regenerated resources; wind, sun, water, biomass and heart inside Earth are used to produced renewable electricity.

The large volumes of energy sold in the Electricity market depends on following factors;

 Increased amount of renewable electricity products availability

 Availability of cheap renewable resources

 Market value of purchasing renewable electricity recognition by government agencies, businesses, and other public and private organizations.

Most customers in the US prefer to purchase electricity that is produced by renewable resources from their providers, and all of the electricity customers could buy some certificates for renewable and carbon offset products, these are now widely accepted in US. There is a great opportunity for focusing on the renewable electricity in order to satisfy an increased electricity market demand of US.

Figure 2.1: Electrical Generation Fuel Sources in America [26]

Obviously, renewable certificate products and renewable electricity are now nationwide based on several factors.