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8/13/2019 Energy and Reserve Market Designs With Explicit
IEEE TRANSACTIONS ON POWER SYSTEMS, VOL. 18, NO. 1, FEBRUARY 2003 53
Energy and Reserve Market Designs With ExplicitConsideration to Lost Opportunity Costs
Deqiang Gan and Eugene Litvinov
Abstract—The primary goal of this work is to investigate thebasic energy and reserve dispatch optimization (cooptimization)in the setting of a pool-based market. Of particular interest is themodeling of lost opportunity cost introduced by reserve allocation.We derive the marginal costs of energy and reserves under a va-riety of market designs. We also analyze existence, algorithm, andmultiplicity of optimal solutions. The results of this study are usedto support the reserve market design and implementation in ISONew England control area.
Index Terms—Electricity market, marginal pricing, optimiza-tion, power systems, spinning reserve.
NOMENCLATURE
Node energy demand, a vector.
System reserve demand (or requirement), a scalar.
Unit vector, every elements of is unity.
Lost opportunity cost function.
Transmission thermal limit vector.
Index set of generators (consists of 1, 2, 3, …).
Lost opportunity cost price.
Energy bid price/generation.
Reserve bid price/allocation.
Generation sensitivity factor matrix.
Equals to 1 or 0 indicating if a generator incurs lost
opportunity cost.Energy nodal price vector.
Reserve clearing price.
I. INTRODUCTION
THERE EXIST two school of thoughts for market design asderegulation in power industry proceeds. They are com-
monly known as pool model and bilateral model [1], [2]. ISONew England (ISO-NE) control area electricity market followsthe concept of pool model [3] and [4].
In a pool-based market, energy and reserves are centrally andoptimally allocated based on volunteer bids (in this paper re-
serve refers to 10-min spinning reserve). Under two-settlementdesign [4], the allocation of energy and reserves is implemented
in two steps—day-ahead scheduling and real-time dispatch. The
optimization concepts of the two steps are, broadly speaking,similar. In this study, we focus on the market design issues inthe real-time dispatch setting.
Manuscript received January 23, 2002; revised June 21, 2002.D. Gan was with ISO New England, Inc., Holyoke, MA 01040 USA.
He is now at Zhejiang University, Zhejiang 310027, China (e-mail:[email protected]).
E. Litvinov is with ISO New England, Inc., Holyoke, MA 01040 USA(e-mail: [email protected]).
Digital Object Identifier 10.1109/TPWRS.2002.807052
While the idea of locational marginal pricing advocated in
[5]–[7] seemingly dominates the pool-based energy markets,
there is little consensus on how to structure reserve markets.
In fact, the design of reserve markets is often a debatable
topic. Discussions on this topic can be found in, say, [8]–[12],
[22].
One of the current major tasks in the ISO New England, Inc. is
to study and possibly improve the existing reserve market. Aside
from a long-term forward market, which will not be discussed
here, the following four alternative designs received attention in
GAN AND LITVINOV: ENERGY MARKET DESIGNS WITH CONSIDERATION TO LOST OPPORTUNITY COSTS 59
ACKNOWLEDGMENT
The authors have benefitted from the discussions in ISO-NE
Reserve Market Design Working Group. The opinions described
in the paper do not necessarily reflect those of ISO New Eng-
land, Inc. The authors remain solely responsible for errors.
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Deqiang Gan received the Ph.D.degree in electrical engineering from XianJiaotong University, Xian, China, in 1994.
Currently, he is with Zhejiang University, Zhejiang, China. He was a SeniorAnalyst in ISO New England, Inc., Holyoke, MA, where he worked on is-sues related to the design, implementation, and economic analysis of electricitymarkets. Prior to joining ISO New England, Inc., he held research positions atseveral universities in the U.S. and Japan.
Eugene Litvinov obtained the B.S. and M.S. degrees from the Technical Uni-versity, Kiev, Ukraine, U.S.S.R., and the Ph.D. degree from Urals PolytechnicInstitute, Sverdlovsk, Russia.
Currently, he is a Director of Technology with the ISO New England,Holyoke, MA. His main interests are power system market clearing models,system security, computer applications to power systems, and informationtechnology.