Pricing Energy and Reserves Using Stochastic Optimization in an Alternative Electricity Market

This paper presents a stochastic linear programming model that can be used for pricing in electrical energy and reserve markets. It addresses capacity, energy, and reserve dispatch problems that may arise from n-1 contingency scenarios. Possible market solutions focusing on generator compensation using real-time, day-ahead, and hybrid schemes are enumerated, along with opportunities for consumer pricing and transmission costing. This model is illustrated on a 6-bus test system as well as a larger 66-bus system representing the Ontario network. A key difference among schemes is the degree of risk to the generators, measured by variance in profit