Co-optimization of energy and operating reserve in real-time electricity markets

Energy and reserve co-optimization is thought to be an efficient approach for allocating resource and revenue in electricity market operations whereas other schools of thought such as sequential ancillary-service auction, separation of energy and reserve markets, and forward reserve markets, become more questionable. In recent years, some electricity markets in North America, aim to deploy such technique so as to ensure their system integrity in selecting right resources for right products at the right time and the right price. This framework proposes a computational model for co-optimizing energy and operating reserve (OR) products in real-time operation via linear programming (LP). Security-constrained economic dispatch (SCED) is applied to problem formulation representing physical and functional requirements in the multi-interconnected control areas. Scarcity pricing which reflects a true cost of generation inadequacy is also deployed in pricing scheme in the means of determining expected cost of unserved energy. In this linear program, an economic agent such as independent system operator (ISO) or regional transmission organization (RTO) minimizes the total cost of real-time operation while obtaining the optimal schedules of energy and OR, including spinning reserve (SR) and non-spinning reserve (NR). The objective function of the LP model includes variable cost of generating units, availability offers for on-line and off-line units, and expected cost of unserved energy. The sets of constraints are composed of load balance constraints, resource limit constraints, transmission constraints, ramping constraints, and operating reserve constraints. The linear co- optimization model simplifies market design and implementation while not compromising any essential properties of electric power system. A validity of this framework is illustrated by a numerical example.