For sake of clarity, we will focus quite a bit of our attention on electricity markets because the generation and transmission of electricity are two of the primary reasons for the existence of energy markets. In addition, I have spent a part of my professional and academic career studying and working in the electricity markets (Mack 1986, 1999). However, please note that other energy products (oil, gas, etc.) will be discussed as well.
Power and energy are two words often confusingly interchanged. These two key terms are summarized in Figure 1.1 and more rigorously defined as follows: