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Title: Dual pricing algorithm in ISO markets

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:
 [1];  [2];  [3]; ORCiD logo [3]
  1. Federal Energy Regulatory Commission (FERC), Washington, D.C. (United States)
  2. Sandia National Lab. (SNL-NM), Albuquerque, NM (United States)
  3. Federal Energy Regulatory Commission (FERC), Washington, D.C. (United States); Johns Hopkins Univ., Baltimore, MD (United States)
Publication Date:
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.
O'Neill, Richard P., Castillo, Anya, Eldridge, Brent, & Hytowitz, Robin Broder. Dual pricing algorithm in ISO markets. United States. doi:10.1109/TPWRS.2016.2614891.
O'Neill, Richard P., Castillo, Anya, Eldridge, Brent, and Hytowitz, Robin Broder. Mon . "Dual pricing algorithm in ISO markets". United States. doi:10.1109/TPWRS.2016.2614891. https://www.osti.gov/servlets/purl/1329629.
@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 = {2016},
month = {10}
}

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Cited by: 1 work
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