Uncertainty Marginal Price, Transmission Reserve, and Day-ahead Market Clearing with Robust Unit Commitment

TL;DR

This paper introduces the Uncertainty Marginal Price (UMP) to price uncertainties and reserves in power markets, proposing a robust market clearing mechanism that improves allocation, pricing, and financial fairness amid renewable energy uncertainties.

Contribution

It develops a novel market clearing mechanism incorporating UMP and robust unit commitment, addressing uncertainty pricing, reserve allocation, and FTR underfunding issues.

Findings

UMP effectively prices uncertainty and reserves.

Transmission reserves are essential for uncertainty accommodation.

The proposed mechanism covers FTR underfunding through congestion funds.

Abstract

The increasing penetration of renewable energy in recent years has led to more uncertainties in power systems. These uncertainties have to be accommodated by flexible re- sources (i.e. upward and downward generation reserves). In this paper, a novel concept, Uncertainty Marginal Price (UMP), is proposed to price both the uncertainty and reserve. At the same time, the energy is priced at Locational Marginal Price (LMP). A novel market clearing mechanism is proposed to credit the gener- ation and reserve and to charge the load and uncertainty within the Robust Unit Commitment (RUC) in the Day-ahead market. We derive the UMPs and LMPs in the robust optimization framework. UMP helps allocate the cost of generation reserves to uncertainty sources. We prove that the proposed market clearing mechanism leads to partial market equilibrium. We find that transmission reserves must be kept explicitly in addition to generation reserves for uncertainty accommodation. We prove that transmission reserves for ramping delivery may lead to Financial Transmission Right (FTR) underfunding in existing markets. The FTR underfunding can be covered by congestion fund collected from uncertainty payment in the proposed market clearing mechanism. Simulations on a six-bus system and the IEEE 118-bus system are performed to illustrate the new concepts and the market clearing mechanism.