Effect of Considering Network Constraints in Energy or Reserve Market on Procurement Cost of Market Players

With the increasing penetration of renewable energy sources, matching the instantaneous supply-demand balance in the power system has become a challenging task. To maintain this balance, the system operator is responsible for procuring reserve, making it a critical aspect of grid operation. Market mechanisms have been adopted as effective means to procure reserve. However, previous studies have indicated that relying solely on market mechanisms could potentially destabilize the grid. Therefore, it is essential to incorporate grid constraints effectively into electricity markets. In this paper, we analyze the effect of considering network constraints in the energy or reserve markets on the procurement costs of market players. The results indicate that introducing network constraints into the reserve market increases the procurement costs for market participants but enables reliable supply and demand operations.