Engineering Economics

Our experience of the past decades has increased the need to bring the results of our research into an international economic marketplace. In devices and apparatus this has meant an increasing awareness of the potential for efficient production, and, significantly, of the importance of meeting market criteria in final use. The revolution in the ownership and basic operations of power systems has forced us to integrate issues of operating economics throughout the control hierarchy, as well as to provide increasing detail in the economic and financial evaluation of system operations and systems planning.

Because of its unique resources, LEES continues to be a leader in the integration of engineering and economics in the area of power systems operations and control in three specific areas: operational pricing, planning, and, most recently, performance monitoring and control. LEES faculty and staff developed the theoretical and practical implementation of Real Time Pricing (RTP) or "spot pricing" of electricity, and we applied the principles to a series of test utilities within the United States. The same team applied these principles to the pricing of transmission services--specifically, wheeling and open access--combining the basic physics of power flows (Kirchhoff's Laws) with Keynesian economics. This work, published by members of the faculty and staff in Spot Pricing of Electricity (Kluwer Academic Press, 1988), has been used as the operating basis for the privatization of the U.K. power system and operational pricing of transmission services within specific regions of the United States, and in a number of national grids in Europe, Latin America and New Zealand.

By combining skills in operations research, economics, and power systems, faculty and staff of LEES developed the Electric Generation Expansions Analysis System (EGEAS), under funding from the Electric Power Research Institute. EGEAS has evolved through its commercial application and continues to provide state- of-the-art planning capabilities to electric utilities worldwide. Traditionally, the transmission system has been considered the "glue" of the electric power sector. While its operational objective has been to lower the total cost of electricity supplied through greater efficiency in power transfers, little attention has been paid to performance monitoring and control of the components of the system themselves. Faculty and staff at LEES are developing technical monitoring devices and formulating control logics that incorporate engineering and economic control signals.

Within LEES, engineering economics is always seen as combined within a specific development context, ranging from product development to power systems planning operations and control. Students working in this area develop expertise in microeconomics and operations research through course work and/or working experience in technology transfer and R \& D planning and management.

Current Projects:

None available

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