Online Electricity Pricing from Frequency Measurements

TL;DR

This paper proposes a novel method for real-time electricity pricing using frequency measurements, integrating market dynamics with grid frequency to enable distributed, local price formation.

Contribution

It introduces an explicit, distributed PID-like controller mechanism for generators that derives prices solely from local frequency data, enabling online pricing.

Findings

Developed a dynamic price-discovery process based on frequency measurements.

Derived an explicit price formation mechanism integrated with grid frequency dynamics.

Proposed a distributed controller that remunerates generators based on local frequency signals.

Abstract

Frequency dynamics in power systems reflect active power imbalance in real time, thereby providing an instantaneous signal to inform electricity pricing. However, existing real-time markets operate on much slower timescales and fail to exploit this signal. In this letter, we develop integrated market--frequency dynamics that enable online pricing directly from frequency measurements. Representing the real-time market as a dynamic price-discovery process, and integrating this process with the grid frequency dynamics, we derive an explicit price formation mechanism from frequency measurements. This mechanism manifests as a distributed PID-like controller for each generator, where frequency response is driven and remunerated by electricity prices derived solely from local frequency measurements.