A proposed model for co-optimization of energy and reserve in competitive electricity markets

Operating reserve assessment has become increasingly important in the new utility environment in which ancillary services have been assigned a value. This paper presents a procedure for compulsory provision of spinning reserve using a risk-constrained cost-based mechanism. In this mechanism, the electrical energy and spinning reserve are dealt with simultaneously because the provision of reserve cannot be decoupled from the provision of energy. Generators are paid the opportunity cost associated with their reduced energy because compulsion is financially unattractive among them. The transmission system reliability is considered in a simplified manner when computing composite system risk. In the proposed structure, the Independent System Operator (ISO) is responsible for reliability management and is thus responsible for providing sufficient reserve on behalf of the users of the system. The method is applied to the Roy Billinton Test System (RBTS). The General Algebraic Modeling System (GAMS Rev. 140) is used to solve the mixed integer nonlinear co-optimization problems.