Auction design for power markets based on standardized contracts for energy and reserves

The wholesale power markets have undergone substantial change over the past few years to deal with increasing penetrations of variable energy resources. The market design and processes have become more complex because of introduction of new products and services to deal with the variability and intermittency of renewable resources. Additionally, the increasing adoption of distributed energy resources presents new challenges for the power grid operations, requiring additional flexibility to ensure stable, reliable, and resilient grid operations. The current market designs, however, do not explicitly value flexibility from resources. This paper presents a novel unit commitment/economic dispatch problem formulation that explicitly values the flexibility offered by resources. The market design is based on the concept of two-part pricing where resources are first paid to make their capacities available, including the flexibility, in the day-ahead markets and subsequently paid performance payments based on real-time dispatch.