Market Price Calculations in Restructured Electricity Markets

In the traditional organisation of the power market, the generation Unit Commitment and Dispatch problem was solved as a cost minimisation problem. After deregulation of the electricity sector, the problem must be solved as a profit maximising problem. It is necessary to find feasible market prices....

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Bibliographic Details
Published inAnnals of operations research Vol. 124; no. 1-4; pp. 49 - 67
Main Authors Doorman, Gerard, Nygreen, Bjørn
Format Journal Article
LanguageEnglish
Published New York Springer Nature B.V 01.11.2003
Subjects
Algorithms
Consumption
Electric utilities
Electricity
Generators
Market prices
Mathematical models
Mathematical programming
Operations research
Pricing policies
Reserve requirements
Response time
Studies
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Summary:In the traditional organisation of the power market, the generation Unit Commitment and Dispatch problem was solved as a cost minimisation problem. After deregulation of the electricity sector, the problem must be solved as a profit maximising problem. It is necessary to find feasible market prices. This is difficult, because simple marginal cost based prices not always cover startup and operation-independent costs, with the result that the generator would choose not to run with such prices. In this paper a market structure is proposed with a central market operator computing the market equilibrium for both energy and reserves, based on generator offers and consumer bids. It is shown that it is possible to find feasible market prices. Using a simple test system, it is shown that demand elasticity can have a profound impact on prices and generator revenues and profits during peaking hours. [PUBLICATION ABSTRACT]
ISSN:0254-5330
1572-9338
DOI:10.1023/B:ANOR.0000004762.31449.33