Pricing Multi-period Dispatch Under Uncertainty

Abstract

Price formation in the context of multi-period dispatch of electricity under operational uncertainty is considered. General and partial equilibrium conditions for the locational marginal price (LMP) is examined. It is shown that, when the market participants are provided with limited forward prices, no uniform price exists for the partial equilibrium model in general. As a consequence, market participants have incentives to deviate from the optimal economic dispatch. Taking explicit accounts for ramping constraints, an extension of LMP, referred to as temporal locational marginal pricing (TLMP), is proposed that reflects both generation and opportunity costs of generators. Although discriminative, TLMP and the optimal economic dispatch satisfy both the general and partial equilibrium conditions for which, given the TLMP, dispatch schedules generated individually by profit-maximizing participants match the solution of the centralized social welfare maximization. TLMP is then extended for ex post pricing. The resulting incremental TLMP (iTLMP) is shown to provide revenue adequacy for the system operator and price supports for participants who offer sufficient ramping capability. Numerical simulations are used to demonstrate the performance of LMP, flexible ramping product (FRP), TLMP, and iTLMP.