Making unit commitment decisions when electricity is traded at spot market prices

We present a new formulation to the unit commitment problem suitable for an electric power producer in a deregulated market and consider computationally efficient procedures to solve it. When the option of selling or buying electric power at spot market prices is included in unit commitment decisions, the optimal solution of a UCP with M units under standard operating and load constraints can be obtained by solving M uncoupled sub-problems. We account for the volatility of the spot market price of electricity by using a stochastic model. The model incorporates both the stochastic features of the availabilities of generating units participating in the market and the uncertainty of the aggregate load. We use probabilistic dynamic programming to solve the stochastic optimization problem. We show that for a market of 150 units the unit commitment problem can be accurately solved in a reasonable time by using the normal, Edgeworth, or Monte Carlo approximation methods for estimating the needed probability distributions.