Dual pricing algorithm in ISO markets

O'Neill, Richard P.; Castillo, Anya; Eldridge, Brent; Hytowitz, Robin Broder

doi:10.1109/TPWRS.2016.2614891

Title: Dual pricing algorithm in ISO markets

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Abstract

The challenge to create efficient market clearing prices in centralized day-ahead electricity markets arises from inherent non-convexities in unit commitment problems. When this aspect is ignored, marginal prices may result in economic losses to market participants who are part of the welfare maximizing solution. In this essay, we present an axiomatic approach to efficient prices and cost allocation for a revenue neutral and non-confiscatory day-ahead market. Current cost allocation practices do not adequately attribute costs based on transparent cost causation criteria. Instead we propose an ex post multi-part pricing scheme, which we refer to as the Dual Pricing Algorithm. Lastly, our approach can be incorporated into current dayahead markets without altering the market equilibrium.

Authors:

O'Neill, Richard P. ^[1]; Castillo, Anya ^[2]; Eldridge, Brent ^[3];

^[3]

Federal Energy Regulatory Commission (FERC), Washington, D.C. (United States)
Sandia National Lab. (SNL-NM), Albuquerque, NM (United States)
Federal Energy Regulatory Commission (FERC), Washington, D.C. (United States); Johns Hopkins Univ., Baltimore, MD (United States)

Publication Date:: Mon Oct 10 00:00:00 EDT 2016

Research Org.:: Sandia National Lab. (SNL-NM), Albuquerque, NM (United States)

Sponsoring Org.:: Federal Energy Regulatory Commission; USDOE

OSTI Identifier:: 1329629

Report Number(s):: SAND2016-10232J
Journal ID: ISSN 0885-8950; 648218

Grant/Contract Number:: AC04-94AL85000

Resource Type:: Accepted Manuscript

Journal Name:: IEEE Transactions on Power Systems

Additional Journal Information:: Journal Name: IEEE Transactions on Power Systems; Journal ID: ISSN 0885-8950

Publisher:: IEEE

Country of Publication:: United States

Language:: English

Subject:: 97 MATHEMATICS AND COMPUTING

Citation Formats


                    O'Neill, Richard P., Castillo, Anya, Eldridge, Brent, and Hytowitz, Robin Broder. Dual pricing algorithm in ISO markets.  United States: N. p., 2016. 
Web.  doi:10.1109/TPWRS.2016.2614891.

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                    O'Neill, Richard P., Castillo, Anya, Eldridge, Brent, & Hytowitz, Robin Broder. Dual pricing algorithm in ISO markets.  United States.  https://doi.org/10.1109/TPWRS.2016.2614891

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                    O'Neill, Richard P., Castillo, Anya, Eldridge, Brent, and Hytowitz, Robin Broder. Mon .  
"Dual pricing algorithm in ISO markets".  United States.  https://doi.org/10.1109/TPWRS.2016.2614891.  https://www.osti.gov/servlets/purl/1329629.

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@article{osti_1329629,

  title        = {Dual pricing algorithm in ISO markets},

  author       = {O'Neill, Richard P. and Castillo, Anya and Eldridge, Brent and Hytowitz, Robin Broder},

  abstractNote = {The challenge to create efficient market clearing prices in centralized day-ahead electricity markets arises from inherent non-convexities in unit commitment problems. When this aspect is ignored, marginal prices may result in economic losses to market participants who are part of the welfare maximizing solution. In this essay, we present an axiomatic approach to efficient prices and cost allocation for a revenue neutral and non-confiscatory day-ahead market. Current cost allocation practices do not adequately attribute costs based on transparent cost causation criteria. Instead we propose an ex post multi-part pricing scheme, which we refer to as the Dual Pricing Algorithm. Lastly, our approach can be incorporated into current dayahead markets without altering the market equilibrium.},

  doi          = {10.1109/TPWRS.2016.2614891},

  journal      = {IEEE Transactions on Power Systems},

  number       = ,

  volume       = ,

  place        = {United States},

  year         = {Mon Oct 10 00:00:00 EDT 2016},

  month        = {Mon Oct 10 00:00:00 EDT 2016}

}

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