Commitment Cost Allocation of Fast-Start Units for Approximate Extended Locational Marginal Prices

Abstract

In the U.S. electricity markets, locational marginal prices (LMPs) are obtained in economic dispatch with fixed commitment decisions. The costs of committing or dispatching fast-start units at their minimum limits may not be covered by LMPs and significant uplift payments are thus needed. Extended LMPs (ELMPs) were established by MISO to appropriately reflect these costs, but are computationally expensive for market implementation. The approximate ELMP (aELMP) model is then developed with reduced complexity. An important design issue that highly affects aELMPs is to allocate commitment costs of fast-start units over time. However, it is difficult to obtain an allocation for the simplified model to effectively approximate the complex ELMPs. In this paper, allocation guidelines are derived in the day-ahead energy market without considering transmission capacity constraints for simplicity. The idea is to separate the ELMP problem into individual-hour problems resembling the aELMP model by using Lagrangain relaxation. Karush–Kuhn–Tucker (KKT) conditions are then innovatively used to derive guidelines for an easily implementable allocation that utilizes the commitment and dispatch results. To examine effectiveness of the guidelines, aELMPs are compared with ELMPs and LMPs. Numerical results show that the resulting aELMPs effectively approximate ELMPs and reduce uplift payments.