Generation Reserve Allocation and Pricing

R.W. Ferrero and S.M. Shahidehpour (USA)


Spot pricing, power system security, ancillary electrical services, reserve services, security constrained economic dispatch.


In the deregulated power industry, unbundling of ancillary electrical services is of vital importance. Operating (spinning and fast-acting) power system reserve is an ancillary service used to withstand network contingencies. Competition among service providers in deregulated power systems is encouraged by optimal allocation and pricing of available reserves. We introduce a new methodology for allocating and pricing operating reserves. A modified version of the security constrained economic dispatch is formulated. Network constraints and active losses are considered in the formulation. The optimal spot price for operating reserve is calculated from the Lagrange multipliers of reserve constraints. Allocated reserve for local contingencies is considered separately from that used for contingencies in other areas; hence, reserves’ genuineness is assured. An example of 3-area system is used to illustrate the proposed methodology.

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