ECON3348 · Economics

Economics of Electricity Markets

Morrissey College of Arts & Sciences

Every five minutes of every hour, of every day, of every year, virtual auctions set clearing prices and quantities for electricity markets in New England. This process, along with related markets, drives $10+ billion to change hands every year, and is replicated (with slight differences) in six other regions across the United States. When it works well, it is a little noticed backbone of modern life. When problems arise, cities can be plunged into prolonged rolling blackouts with devastating consequences. While well briefly examine standard models of resource economics, this class will spend the significant majority of its time thoroughly analyzing the history, present state, and possible futures of electricity markets, with a particular focus on the industry in the United States. Well use economic reasoning to consider pressing challenges facing the industry, such as the incorporation of decarbonization and green technologies into our electric grid, how battery storage is changing the energy landscape, and how to prepare for the coming electrification of transportation and heating.