Performance-Based Pricing of Frequency Regulation in Electricity Markets

The emergence of high penetration of renewable energy sources in the energy mix of power systems has substantially increased the need for faster-ramping resources participating in the frequency regulation service procured via market mechanisms by the system operators. However, current market mechanisms do not properly align the incentives for participation since resources are not compensated for the actual frequency regulation they provide nor for the accuracy with which they follow the automatic generation control (AGC) dispatch signal. In this paper, we evaluate the current mechanisms for procuring, dispatching and compensating resources for the frequency regulation service. We also propose a comprehensive approach for calculating the performance payment that includes the actual service they provide and the accuracy with which they follow the AGC signal. Finally, we perform a study by deploying actual operational AGC data for analyzing the proposed methodology

Day ahead energy market and Reliability Unit Commitment: An integrated approach

The restructured electricity markets typically involve a Day-Ahead Market (DAM), which clears bid-in demand that may be generally different (lower) than the demand forecast. This difference gives rise to reliability concerns to the Independent System Operators (ISOs), which are addressed with the deployment of a mechanism that is usually called Reliability (or Residual) Unit Commitment (RUC). Currently, the ISOs execute the RUC process after the DAM application, to procure additional resources, beyond the DAM energy schedules, to meet the demand forecast. In this paper, we compare the currently employed sequential approach, with a proposed integrated approach which combines the functionality of the DAM and the RUC into one market application. We present the market model including all market commodities, namely energy, ancillary services and RUC capacity, for both methodologies, and apply them on a realistic test case, using actual market/system data. We derive quantitative and qualitative results for a practical system, which illustrate the value of the integration of the market and the reliability functions in the forward spot market. The key conclusion from our simulation runs, is that the integrated approach offers substantial efficiencies by procuring all DAM products simultaneously. © 2014 Power Systems Computation Conference

Market design for the simultaneous optimization of the Day-Ahead market and the reliability unit commitment applications

The design of restructured electricity markets requires a mechanism to ensure that differences between the bid-in demand that clears in the Day-Ahead Market (DAM) and the ISO's demand forecast do not compromise reliability requirements. This mechanism is usually called Reliability (or Residual) Unit Commitment (RUC), and is deployed to procure additional resources, beyond the DAM energy schedules, to meet the demand forecast. In this paper, we present the theoretical foundation of the RUC process and key important considerations in implementing the RUC application. We also provide a description of the general sequential approach in which the DAM application is executed first and then the RUC process is completed. We then offer the design framework for the implementation of an integrated approach which combines the functionality of the DAM and the RUC into one market application. The integrated approach offers substantial efficiencies by procuring all DAM products simultaneously. © 2013 IEEE

Mixed integer parametric bilevel programming for optimal strategic bidding of energy producers in day-ahead electricity markets with indivisibilities

We address the problem of finding the optimal bidding strategy of an energy producer that participates in a single-period day-ahead electricity market, assuming full knowledge of the market's parameters. The problem is formulated as a mixed integer bilevel optimization model, with the producer maximizing his individual profit, at the upper level, and an independent system operator clearing the market at the minimum total system bid-cost, at the lower level. The model utilizes discrete variables to represent the commitment of the production units, which prohibits the application of typical methodologies for finding its optimal solution, such as the substitution of the lower level problem by its first-order KKT optimality conditions. We develop an exact algorithm for the solution of the problem that utilizes important findings from the theory of parametric integer programming, and we report experimental results demonstrating its efficiency on random problem instances. We conclude with a discussion on several computational issues pertaining to the behaviour of this algorithm, and an outline of how the theory developed in the present work can be modified to fit alternative market designs

Greek wholesale electricity market: Forthcoming market changes and bid/cost recovery

The Greek wholesale electricity market is based on a day-ahead unit commitment market clearing and generation dispatch formulation with co-optimization of energy and reserves without the participation of transmission. An important feature of the market design is the cost recovery mechanism, which explicitly compensates generation units for their commitment costs and guarantees a minimum profit equal to 10% of their variable costs. In this paper, we evaluate the current mechanism in comparison to an alternative bid/cost recovery mechanism by simulating the wholesale electricity market for a period of one year. As part of the study we take into account the forthcoming changes for the liberalization of the Greek market that include the physical and virtual sale of a portion of PPC lignite plants, and we examine a likely "business as usual" scenario concerning the resulting bidding strategies. Lastly, we perform a sensitivity analysis with respect to the hydro production and the carbon price