Dual pricing algorithm in ISO markets

Journal Article · Mon Oct 10 00:00:00 EDT 2016 · IEEE Transactions on Power Systems

DOI:https://doi.org/10.1109/TPWRS.2016.2614891· OSTI ID:1329629

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

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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)

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.

• Research Organization: Sandia National Lab. (SNL-NM), Albuquerque, NM (United States)
• Sponsoring Organization: Federal Energy Regulatory Commission; USDOE
• Grant/Contract Number: AC04-94AL85000
• OSTI ID: 1329629
• Report Number(s): SAND2016-10232J; 648218
• Journal Information: IEEE Transactions on Power Systems, Journal Name: IEEE Transactions on Power Systems; ISSN 0885-8950
• Publisher: IEEE
• Country of Publication: United States
• Language: English

Related Subjects

97 MATHEMATICS AND COMPUTING