Location-based scheduling and pricing for energy and reserves: a responsive reserve market proposal

It is well known that given a network that can become constrained on voltage or real power flows, reserves must also be spatially located in order to handle all credible contingencies. However, to date, there is no credible science-based method for assigning and pricing reserves in this way. Presented in this paper is a responsive-reserve scheduling algorithm incorporating constraints imposed by grid security considerations, which include one base case (intact system) and a list of credible contingencies (line out, unit lost, and load growth) of the system. By following a cost-minimizing co-optimization procedure, both power and reserves are allocated spatially for the combined energy and reserve markets. With the Lagrange multipliers obtained, the scheduling algorithm also reveals the locational shadow prices for the reserve and energy requirements. Unlike other pricing and scheduling methods in use, which are usually ad hoc and are based on engineering judgment and experience, this proposed formulation is likely to perform better in restructured markets when market power is a potential problem. An illustrative example of a modified IEEE 30-bus system is used to introduce concepts and present results.