Optimum market strategy for an independent power producer

One of the direct consequences of deregulation is the unbundling of electricity into several marketable products. In addition to electrical energy, reactive power and spinning reserve can be bought and sold through energy exchanging agents or through an independent system operator (ISO) in a deregulated environment. Energy suppliers can compete among themselves to supply reactive power and spinning reserve in addition to real power. An independent power producer can optimize its profit by producing a suitable combination of real power, reactive power and spinning reserve. The optimum combination of these three commodities, however, would change with a change in the market price for any one of the components. The optimum profit is also subject to the operating constraints of the generating units. An algorithm has been developed to find an optimum combination of real power, reactive power and spinning reserve from a supplier's perspective. The details of the optimization technique and its constraints are presented along with numerical examples.