A Study on Locational Marginal Prices Based on Single-Stage and Multi-Stage Optimization Models

Abstract

Theoretically, there are two kinds of models to calculate Locational Marginal Price (LMP): single-stage optimization model and multi-stage optimization model. In the paper, two mathematical models were analyzed and compared. Economic concept of LMP was explained and LMPs calculation was derived based on optimization methods. Characteristics of LMPs for different optimization models and how marginal generators and non-marginal generators can affect LMPs were discussed. In case study, the PJM five buses system was adopted to calculate LMPs under single-stage and multi-stage optimization model. The study results show that multi-stage model can accomplish economic dispatch more effective than single-stage model. But single-stage optimization model is better competent for LMP based settlement.