Market Clearing for Uncertainty, Generation Reserve, and Transmission Reserve--Part II:Case Study

TL;DR

This paper analyzes the pricing mechanisms in electricity markets considering uncertainty, reserves, and transmission constraints, highlighting the use of Uncertainty Marginal Price and its implications for market incentives and FTR funding.

Contribution

It introduces a robust optimization framework for pricing uncertainty and reserves, compares UMP with traditional reserve prices, and discusses market incentives and FTR underfunding issues.

Findings

UMP effectively prices uncertainty and reserves

Transmission reserve can lead to FTR underfunding

Market incentives are influenced by the new pricing scheme

Abstract

In Part II of this two-part paper, we analyze the marginal prices derived in Part I of this two-part paper within a robust optimization framework. The load and generation are priced at Locational Marginal Price (LMP) while the uncertainty and generation reserve are priced at Uncertainty Marginal Price(UMP). The Financial Transmission Right (FTR) underfunding is demonstrated when there is transmission reserve. A comparison between traditional reserve price and UMP is presented. We also discuss the incentives for market participants within the new market scheme.