Pricing and procurement of operating reserves in competitive pool-based electricity markets |
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| Affiliation: | 1. Department of Electrical Engineering, The Hong Kong Polytechnic University, Hong Kong;2. Department of Electrical Engineering, Zhejiang University, Hangzhou, China;1. Department of Otorhinolaryngology, Union Hospital, Tongji Medical College, Huazhong University of Science and Technology, Wuhan 430022, China;2. Department of Otolaryngology, Wuhan Integrated TCM and Western Medicine Hospital (Wuhan No. 1 Hospital), Tongji Medical College, Huazhong University of Science and Technology, Wuhan 430022, China;1. Faculty of Automatic Control and Computer Engineering, Gheorghe Asachi Technical University of Iasi, Str. Dimitrie Mangeron, Nr. 27, 700050 Iasi, Romania;2. Research Center on Advanced Materials and Technologies, Interdisciplinary Research Department—Field Science, Alexandru Ioan Cuza University of Iasi, Bd. Carol I, Nr. 11, 700506 Iasi, Romania;3. Department of Chemistry, Alexandru Ioan Cuza University of Iasi, Bd. Carol I, Nr. 11, 700506 Iasi, Romania;1. Swiss Institute of Banking and Finance (s/bf), University of St. Gallen, Rosenbergstr. 52, 9000 St. Gallen, Switzerland;2. Centre for European Research (ZEW), Mannheim, Germany;3. University of St. Gallen, Rosenbergstr. 52, 9000 St. Gallen, Switzerland;4. School of Economics and Management, Leibniz University Hannover, Königsworther Platz 1, 30167 Hannover, Germany;5. ICMA Centre, Henley Business School, University of Reading, RG6 6BA, UK |
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| Abstract: | The changing structure of the electricity supply industry is bringing procuring and pricing of operating reserve into a new focus. The efficient rationing and pricing of operating reserve is an important issue to be dealt with in competitive electricity markets, as it is needed to maintain system reliability when economically efficient transactions are accommodated in the power system. This paper sets forth a comprehensive theory for procurement and pricing scheme for operating reserve. The theory is based on capacity–reliability correlation analysis and is compatible with electricity auction in the context of electricity supply industry deregulation. Considering various elements including available capacity of generator, outage cost, reliability index and so on, the capacity–reliability correlation analysis which reflects the equilibrium condition for procurement of operating reserve capacity is built based on an optimal pricing model. Value of capacity and energy of reserve can then be derived. Using the correlation analysis, a novel mechanism for monitoring the existence of participant's gaming behavior is also developed. The optimal pricing of the reserve capacity in a deregulated market is proposed to achieve social welfare-maximization. Simple case studies are carried out to demonstrate the efficiency and the validity of the proposed scheme. |
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