Research on Electricity Markets

Energy efficiency and smart grids

In the future power systems, electricity end-users have small-scale electricity generation of their own, and the surplus is sold through the grid to those in need of power. The rechargeable batteries of electric vehicles function as local energy storages, and the amount of electricity supplied to and drawn from the grid is optimized by the batteries. The end-customer loads are controlled without adverse effects based on the availability of renewable energy sources, the electricity bill is kept down, and the power system capacity is efficiently utilized.

Smart grids are considered to be among the most significant advancements of all time contributing to the reform in the energy market. Our research activities aim at developing the functionalities of smart grids, by which the energy efficiency is enhanced and emissions are reduced in society, and the costs of energy use can be cut. Remotely read energy meters are the first step in this path towards smart grids and the market reform.

Contact person
Doctoral student Tero Kaipia, Mobile +358 50 577 3922,

Electricity market models

In many countries, electricity markets have been opened to competition, as this has been considered more efficient than monopoly operation, for instance. In the liberalized electricity market, electricity producers and purchasers may trade freely in the electricity wholesale market, and the end-customers may shop around with the electricity retailers for the best offer.

An electricity market model includes the operating principles of the electricity market from price formation to risk management. Our activities focus on the analysis of different electricity market models and their characteristics; including for instance the effects of the market model on the components of the consumers' electricity bill.

Considering the proper functioning of the electricity market, unrestricted transfer of electricity in a large enough area, for instance in the Nordic electricity market, is of vital importance. Moreover, an electricity transmission grid with minimum congestion is a prerequisite for the efficient deployment of the generation capacity available in the competitive electricity market.  Our key research areas cover the functioning of the Nordic electricity markets and the integration of the European electricity wholesale market.

Contact person
Associate professor Samuli Honkapuro, tel. +358 400 307 728,

Russian electricity market

Compared for instance with the Nordic countries, there are certain differences in the operation of the Russian electricity market. In Russia, the electricity producers generate income by trading on the power exchange, in addition to which they receive fixed payments for providing electricity generation capacity. In the Nordic countries, again, the electricity producers' income is based on selling electricity on the power exchange or by bilateral contracts, and there are no fixed capacity payments in use.

The amount of the fixed payment for the Russian electricity producers depends for instance on the age and size of the power plant and the fuel used. In Russia, a key contributor to the choice of the electricity market model has been the need to rapidly replace ageing electric power plants with new ones in order to meet the increasing power demand also in the future.

A specific focus of our research is on the knowledge of the operating principles of the Russian electricity market. In our everyday research activities we follow the development trends in the Russian electricity market, assess the future electricity price development in Russia and analyze the potential for the cross-border trade of electricity between Finland and Russia.

Contact person
Associate professor Samuli Honkapuro, tel. +358 400 307 728,

Customer's role in the evolving electricity market

So far, small-scale customers' options in the electricity market have been limited to the opportunity to switch their electricity supplier. Now, instead, smart grids and advances in the small-scale generation technologies allow the small-scale customers to play a more active role in the market. In the future, the end-customers will be able to generate electricity for their own use and sell the surplus, or allow for instance the retailer or the distribution system operator (DSO) to control their demand so that some of the customers' electric appliances will be operated when the power is at cheapest.

Our key research themes are the end-customers' decision-making processes and optimization of the retailers' and distribution system operators' pricing and business practices in the evolving operating environment.

Contact person
Associate professor Samuli Honkapuro, tel. +358 400 307 728,

Power electronics in electricity distribution

The role of power electronic converters is constantly growing in electric power systems. Power electronics is used in electricity generation and transmission but also in the end-use of electricity. The smart functionalities of power electronics provide a means to meet the stringent demands imposed on the cost efficiency and service quality of electricity distribution grids.

The special emphasis of our research activities is on the development of a low-voltage direct current distribution (LVDC) system with extensive application of power electronics. The adoption of LVDC systems is supported by the favourable price development of power electronics, the significant increase in the transmission capacity of low-voltage grids, and the improved grid service quality for the end-customers. The converter applications available to DC distribution provide new opportunities for grid management and electricity trade.

Our research activities aim at developing energy-efficient power electronic converters that are suitable for electricity distribution applications, system-level optimization of DC distribution grids and electrical safety.  Already at present, there are numerous economically feasible and safe application targets for the LVDC systems both in public distribution grids and electricity systems in buildings. An example of the recent research results is the first LVDC system built together with the distribution company Suur-Savon Sähkö Oy in summer 2012. This LVDC grid is intended for constant use in public electricity distribution.

Contact person
Doctoral student Tero Kaipia, Mobile +358 50 577 3922,

Electric vehicles in smart grids

The market penetration of electric vehicles will have an impact on electricity distribution. The electricity distribution grids see electric vehicles as a massive uni- or bidirectional storage of electric energy. The power demand of electric vehicles (typically 15–25 kWh/100 km) as such does not pose a problem to the grids. However, charging and discharging of vehicles in a controlled manner, in other words, integrating electric vehicles seamlessly into smart grids is a future challenge, but also an opportunity.

Within this topic, our research activities focus on studying the large-scale effects of electric vehicles on the development of electricity distribution grids. Here, special emphasis is placed on the requirements set for the distribution management systems and data transfer between vehicles and the grid to ensure the proper functioning of the distribution systems.

Contact person
Post doctoral researcher Jukka Lassila, Mobile +358 50 537 3636,

Strategic development of electricity distribution grids

The electricity distribution grids are ageing at a rapid rate. Moreover, challenging climate conditions threaten distribution grids especially in rural areas, sometimes causing supply interruptions of several days. An increase in distributed generation and bidirectional power transmission imposes further demands on grid planning. These together with many other challenges facing the electricity distribution business have created an urgent demand for massive grid renovations and reforms in the field.

Hence, our key research activities aim at the cost-efficient development of electricity distribution grids taking into account the future boundary conditions. How can we guarantee weatherproof grids also outside urban areas? What are the opportunities provided by smart grids e.g. in terms of distributed generation and energy storages, and what are their impacts on the transmission fees paid by the end-customers?

Contact person
Post doctoral researcher Jukka Lassila, Mobile +358 50 537 3636,

Economic Regulation of the Electricity Distribution Business

Electricity distribution is a monopoly activity, as it is not technically or economically viable to construct and maintain parallel distribution systems. Therefore, the Energy Market Authority supervises the performance of the distribution system operators with respect to the reasonableness of pricing and supply reliability. Economic regulation impacts on the commercial viability of network investments, thereby steering the development of the distribution systems and the related business activities.

Our key research activities focus on regulatory models and the associated efficiency measurement, and the impacts of regulation on the enterprises in the field. The functionality of the regulatory model and possible development targets have been analyzed in numerous research projects in cooperation with the authorities, enterprises and associations in the energy sector. The research results have had a significant influence on the regulatory model applied in Finland.

Contact person
Associate professor Samuli Honkapuro, tel. +358 400 307 728,


IEEE -publications

Contact Information

LUT School of Energy Systems – Electrical Engineering
P.O. Box 20
FI-53851 Lappeenranta

Tel. +358 294 462 111

LUT School of Energy Systems
Head of School Jarmo Partanen

Electrical Engineering
Head of Department Olli Pyrhönen
Head of Degree Programme Katja Hynynen
Department Secretary Marika Hyrylä