The uses and misuses of OPF in competitive market structures

The paper reviews the formulation of optimal power flow (OPF) and its role in dispatch. It then outlines possible uses of OPF market structures and describe the major drawbacks. The use of OPF for market players with a portfolio of generating units, however, is an appropriate and useful application of OPF in competitive markets. The OPF in such cases is a useful tool to determine the most cost-effective approach to discharge certain contracted market obligations since there is a centrally controlled single ownership situation. The application of OPF in such cases is reviewed. The paper emphasizes the limitations and capabilities of applying the OPF tool in market structures.