Dual variable decomposition to discriminate the cost imposed by inflexible units in electricity markets

Abstract

Electricity markets, without any doubt, have been witnessing the times when inflexible generating units have brought the outcome of markets into questions. This negative aspect is more manifested when a generating unit benefits from its own inflexibility. Emerging such kind of deficits in electricity markets may demotivate or even dissuade the generation companies to invest on flexible units. In this paper, an entire analytical methodology based on duality theorem is proposed to discriminate the share of each binding constraint on individual firms’ income. The proposed formulation is able to concurrently determine the Decomposed Dual Variables (DDVs) in the market clearing process. The post-process or a fresh round of problem solving is hence not needed for calculation the impact of units physical constraints on the outcome of market. The settlement process is then adjusted to assure fairness in remunerating generating units and hence alleviate the power system planners’ concerns regarding the flexibility issue. The effectiveness of the proposed methodology is verified through comprehensive studies on the 24-bus and 57-bus IEEE test systems. Owing to DDVs, the positive effect of the generating units constraints on its own incomes is detected and the scheduled generating levels stem from such positive effects are subsequently settled based on a proposed mechanism. The simulation shows that the new analytical scheme is capable of detecting and mitigating the potential market power induced by units inflexibility.