Theoretical Aspects of an Electricity Marginal Cost Model

A separable programming model has been built to estimate electricity marginal costs. The model can be solved by applying linear programming techniques, hence marginal costs are obtained from shadow prices of model's optimal solution. In order to obtain more accurate and more detailed composition of electricity marginal costs, shadow prices are mathematically explained rigorously from model's structural points of view. Theoretical aspects of our electricity marginal cost model are investigated by applying theory of linear programming. Furthermore, various types of mathematical expression are also show with their interpretation in the real power system.