Minimizing Market Operation Costs Using A Security-Constrained Unit Commitment Approach

This paper presents the methodology and the results of the Must Offer Waiver process as applied in the California electricity market. The goal of this cost saving process is to minimize the market operation costs by deploying an optimal unit commitment approach. This procedure replaces the “ first come, first served” Must Offer Waiver process that is currently in place. It uses a Security Constrained Unit Commitment application to commit enough units to meet the reliability requirement and minimize the total start up and minimum load costs over the specified time period. A post Must Offer Waiver procedure utilizing the Security Constrained Unit Commitment is also established to calculate and allocate the incremental costs associated with the local reliability requirement. The key components of the new Must Offer Waiver procedure, the methodology and computer algorithm of Security Constrained Unit Commitment, and the methodology of the incremental cost calculation and allocation are addressed in this paper. The paper finally presents computational results based on actual data to illustrate the benefits of the new approach.