Electricity market near-equilibrium under locational marginal pricing and minimum profit conditions

Abstract

This paper provides a tool to determine the near-equilibrium of an electric energy market. This market works under locational marginal pricing, i.e., generating units and demand loads are paid and pay, respectively, the locational marginal prices corresponding to the nodes they are connected to. The near-equilibrium is defined as the energy transaction levels for which generating companies maximize their respective profits and consumption companies maximize their respective utilities. An independent system operator clears the market maximizing the social welfare. Conditions that ensure minimum profit for generating units can be included. However, these conditions may render a generating unit uncompetitive and expel it from the market. Demands are taken to be non-constant and values are determined as part of the solution. The near-equilibrium is obtained through the solution of a mixed-integer quadratic problem equivalent to a mixed linear complementarity problem that includes the minimum profit conditions. It is important to note that the near-equilibrium concept presented in this paper does not solve a market equilibrium when indivisibilities such as start up costs or the like are present. Lastly, we validate the proposed model on a case study using data from the IEEE Reliability Test System.