Chiara Lo Prete is Assistant Professor of Energy Economics in the John and Willie Leone Family Department of Energy and Mineral Engineering. Dr. Lo Prete’s research applies microeconomics, optimization and statistics to the study of power systems and their environmental effects. She investigates reforms in electricity market design to face new challenges determined by the interactions between day-ahead energy markets and related financial positions, limits on fuel availability and growth of intermittent renewables. She also studies power system responses to environmental policies and incentives that affect grid operations and investment in market environments. Before joining Penn State in July 2014, Dr. Lo Prete was a Ziff Environmental Fellow at Harvard University from 2012 to 2014. She earned a B.A. in Economics (summa cum laude) from LUISS University (Italy), a M.A. in Energy Economics from the Scuola Mattei (Italy), and a M.S. and Ph.D. in Geography and Environmental Engineering from The Johns Hopkins University.
Cross-Product Manipulation in Electricity Markets
The use of uneconomic virtual transactions in day-ahead electricity markets to benefit related financial positions has emerged as a policy concern in recent years. Cross-product manipulation has been studied extensively in securities and commodities markets, but its theoretical foundations and empirical implications in electricity markets are not well understood. In a series of papers, Dr. Lo Prete and collaborators have used equilibrium models to examine how market participants may affect electricity prices over a sustained period using only financial positions from the day-ahead market. Ongoing work focuses on the application of machine learning methods to detect this type of price manipulation in the data.
Market Reforms for the Evolving Grid
Electric power systems are undergoing a major transition that is progressively shifting the resource mix for power generation towards natural gas and renewable energy sources. This evolution poses challenging market design and policy problems that were unknown, or less material, in the early designs of organized electricity markets. For example, during extended cold weather periods, natural gas-fired generation may be severely limited due to fuel delivery infrastructure constraints. Uncertainty and variability in solar- and wind-based generation may cause inefficient scheduling and dispatch of the conventional generation fleet, increasing the need for out-of-market uplift payments to generation resources that are committed and dispatched by the system operators, but are unable to recover their total production costs through market clearing prices. These challenges may be addressed through market mechanisms. Ongoing research funded by the Sloan Foundation examines whether efficiency in power systems operations may be improved by introducing intraday energy markets that incent participants to adjust their schedules based on private wind production forecasts. In another project sponsored by the National Science Foundation, Dr. Lo Prete is investigating market mechanisms to promote efficient investments for grid resilience against natural gas disruptions.
Power Market Responses to Energy and Environmental Policies
One theme of Dr. Lo Prete’s research program studies how power markets respond to energy and environmental policies that affect grid operations and investment. Recent work has focused on state-level policy actions that affect the functioning of wholesale electricity markets in ways that undermine the fundamental principles on which these markets were designed. For example, regional cap-and-trade programs to regulate CO2 emissions from the electricity sector often create concerns of leakage, defined as the shift in production and associated emissions from the region where climate regulations apply to surrounding unregulated jurisdictions. Ongoing research uses statistical analysis of historical data to test the hypothesis of leakage from California’s greenhouse gas cap-and-trade program in the Western Interconnection.
- N. Guo and C. Lo Prete (2019). “Cross-product manipulation with intertemporal constraints: an equilibrium model”. Accepted for publication, Energy Policy.
- C. Lo Prete, W.W. Hogan, B. Liu and J. Wang (2019). “Cross-product manipulation in electricity markets, microstructure models and asymmetric information”. The Energy Journal 40(5), pp. 221-246.
- C. Lo Prete, N. Guo, and U.V. Shanbhag (2019). “Virtual bidding and financial transmission rights: an equilibrium model for cross-product manipulation in electricity markets”. IEEE Transactions on Power Systems 34(2), pp. 953–967.
- A. Kleit, C. Lo Prete, S. Blumsack and N. Guo (2019). “Weather or not? Welfare impacts of natural gas pipeline expansion in the Northeastern U.S.” Energy systems 10(3), pp. 593-633.
- C. Lo Prete and B.F. Hobbs (2016). “A cooperative game theoretic analysis of incentives for microgrids in regulated electricity markets”. Applied Energy 169, pp. 524-541.
- C. Lo Prete and B.F. Hobbs (2015). “Market power in power markets: an analysis of residual demand curves in California’s day-ahead energy market in 1998-2000”. The Energy Journal 36(2), pp. 191-218.
- S. Cano-Andrade, M.R. von Spakovsky, A. Fuentes, C. Lo Prete and L. Mili (2015). “Upper level of a sustainability assessment framework for power system planning”. Journal of Energy Resources Technology 137(4), pp. 1-11.
- C. Lo Prete and C.S. Norman (2013). “Rockets and feathers in CO2-power markets? New evidence from the second phase of the EU ETS”. Energy Economics 36, pp. 312-321.
- C. Lo Prete, B.F. Hobbs, C.S. Norman, S. Cano-Andrade, A. Fuentes, M.R. von Spakovsky and L. Mili (2012). “Sustainability and reliability assessment of microgrids in a regional electricity market”. Energy 41, pp. 192-202.
Refereed conference papers
- Y. Shan, C. Lo Prete, G. Kesidis and D.J. Miller (2017). “A simulation framework for uneconomic virtual bidding in day-ahead electricity markets”. Proceedings of the 2017 American Control Conference (ACC), Seattle, WA, May-24-26.
- C. Lo Prete and B.F. Hobbs (2013). “Modeling the interaction between microgrids and electric utilities: a regulator’s perspective”. Proceedings of the Fourth IEEE International Conference on Smart Grid Communications, Vancouver, October 21-24.
- S. Cano-Andrade, M.R. von Spakovsky, A. Fuentes, C. Lo Prete, B.F. Hobbs and L. Mili (2012). “Multi-objective optimization for the sustainable-resilient synthesis/design/operation of a power network coupled to distributed power producers via microgrids”. Proceedings of ASME International Mechanical Engineering Congress and Exposition, vol. 6, Energy: Sustainable Technologies, Houston, TX, November 9-15.