A new swing-contract design for wholesale power markets. (2020)

• Record Type: Book
• Further Information: Note: Leigh S. Tesfatsion.
• Authors: Tesfatsion, Leigh
• Other Names: Tesfatsion, Leigh
• Contents: 1 Introduction 9 2 U.S. RTO/ISO-Managed Wholesale Power Markets: Overview 15 2.1 Chapter Preview 15 2.2 General Goals for Wholesale Power Market Design 15 2.3 U.S. RTO/ISO-Managed Market Operations 16 2.4 Stresses Faced by Current U.S. RTO/ISO-Managed Markets 19 3 Motivation for Current Study 21 3.1 Chapter Preview 21 3.2 Problematic Design Aspects of U.S. RTO/ISO-Managed Wholesale Power Markets 21 3.2.1 Artificial Distinction Between Energy and Reserve 21 3.2.2 Problematic Use of Hedonic Pricing 22 3.2.3 Revenue Insufficiency and Incentive Problems 23 3.2.4 Computational Fragility of LMP Derivations 24 3.2.5 Performance Payment in Advance of Performance Delivery 26 3.2.6 Minimal Direct Representation of Retail Customer Interests 27 3.2.7 Reliance on Overly Simplistic Cost Conceptions 28 3.2.8 Use of Spot-Market Pricing for Forward Markets 30 3.3 Relation of Current Study to Previous Swing-Contract Work 30 4 Swing Contracts for ISO-Managed Wholesale Power Markets 33 4.1 Swing Contract Overview 33 4.2 Swing Contracts: General Formulation 33 4.3 Swing Contracts in Firm or Option Form 35 5 Illustrative Swing-Contract Reserve Offers 37 5.1 Chapter Preview 37 5.2 A Simple Energy-Block Swing Contract in Firm Form 38 5.3 An Energy-Block Swing Contract in Option Form 42 3 4 Contents 5.4 Swing-Contract Implementation of Standard Supply Offers 43 5.5 A Swing Contract Offering Continuous Swing (Flexibility) in Power and Ramp 48 5.6 A Swing Contract Offering Battery Services 50 5.7 Swing-Contract Facilitation of Private Bilateral Contracting 52 6 Swing-Contract Market Design 55 6.1 Chapter Preview 55 6.2 General Swing-Contract Market Formulation 55 6.3 Financial and Physical Feasibility of Swing-Contract Offers 57 6.4 Reserve Bids 58 6.5 Handling of Fixed Reserve Bids and Non-Dispatched Power 59 6.6 Performance Penalties and Incentives 60 6.7 ISO Cost Allocation 61 7 Swing-Contract Market Optimization: Base-Case MILP Formulation 65 7.1 Chapter Preview 65 7.2 General Assumptions and Notation 66 7.3 Discretization of the ISO’s Optimization Problem 67 7.4 ISO Objective Function 71 7.5 Complete Analytical MILP Formulation 72 7.6 Additional Discussion of Optimization Aspects 74 7.7 Five-Bus Test Case 76 7.8 Thirty Bus Test Case with Adaptive Reserve Zones 79 8 Inclusion of Reserve Offers with Price Swing 83 8.1 Chapter Preview 83 8.2 Cost Function Preliminaries 83 8.3 MILP Tractable Form of Reserve Offers with Price Swing 85 9 Inclusion of Price-Sensitive Reserve Bids 91 9.1 Chapter Preview 91 9.2 Incorporation of Benefits 92 9.3 Modeling of Price-Sensitive Reserve Bids 94 9.3.1 Standard Demand Function Formulation 94 9.3.2 Reserve Bids with Time-of-Use Pricing 95 9.3.3 Reserve Bids with Price Swing 95 9.3.4 Reserve Bids Directly Expressed as Benefit Functions 97 9.4 MILP Tractable Approximation of Benefit Functions 98 10 The Linked Swing-Contract Market Design 101 10.1 Chapter Preview 101 10.2 Multistage Optimization and Time Inconsistency 102 10.3 Settlement Time-Consistency of Swing-Contract Markets 105 10.4 Swing-Contract Long-Term Forward Markets 106 10.5 Swing-Contract Short-Term Forward Markets 107 Contents 5 10.6 Swing-Contract Very Short-Term Forward Markets 109 10.7 Swing-Contract Deployment in Real-Time Operations 110 11 Illustration: Linked Day-Ahead and Hour-Ahead Swing-Contract Markets 113 11.1 Chapter Preview 113 11.2 Hour-Ahead Market with Reserve Offers Consisting of Swing-Contract Portfolios 114 11.3 SCED Solution for Hour-Ahead Swing-Contract Market 117 11.3.1 Overview 117 11.3.2 Power Balance 117 11.3.3 Coverage of the ISO’s Uncertainty Set 119 11.3.4 Constrained Minimization of Expected Cost 121 11.4 Linked Day-Ahead and Hour-Ahead Markets 121 12 Standard Modeling of a Competitive Market 125 12.1 Chapter Preview 125 12.2 Key Definitions 125 12.3 Standard Competitive Market Assumptions 126 12.4 Law of One Price for Commodities 126 12.5 Competitive Market: Basic Formulation 127 12.6 Net Surplus Extraction 130 12.7 Market Efficiency Metric 131 12.8 Market Efficiency and Pricing Rules 133 12.9 Strategic Trade Behavior and Trader Market Power 134 13 U.S. RTO/ISO-Managed Markets: Efficiency and Market Power 137 13.1 Chapter Preview 137 13.2 Daily Market Operations 137 13.3 Illustrative Analytical DAM Formulation 140 13.4 Net Surplus Extraction in the Illustrative DAM 141 13.5 Market Power in the Illustrative DAM: Type-I Error 145 13.6 Market Power in the Illustrative DAM: Type-II Error 149 13.7 Market Inefficiency in the Illustrative DAM. 153 13.8 DAM Performance: General Assessment 156 13.9 Scheduling of Bilateral Contracts 158 14 Comparisons with Swing-Contract Markets 161 14.1 Chapter Preview 161 14.2 Product Definition in U.S. RTO/ISO-Managed Markets 162 14.3 Wholesale Power and the Law of One Price (Not) 164 14.4 Differential vs. Uniform Pricing 165 14.5 Comparison of SC and Current U.S. DAM Designs 166 6 Contents 15 Advantages of the Linked Swing-Contract Market Design 169 15.1 Chapter Preview 169 15.2 SC Markets are Physically-Covered Insurance Markets 170 15.3 Longer-Term SC Markets Support New Investment 171 15.4 SC Markets Ensure Revenue Sufficiency 176 15.5 SC Markets Ameliorate Merit-Order Concerns 177 15.6 SC Markets are Robust-Control Mechanisms 178 15.7 SC Markets Reduce Rule Complexity 179 15.8 SC Markets Reduce Gaming Opportunities 180 15.9 SC Markets Have Smaller-Sized Optimizations 182 15.10 Additional Advantages of SC Markets 183 15.10.1 Ensure a Level Playing Field for Resource Participation 183 15.10.2 Permit Co-Optimization of Diverse Reserve 184 15.10.3 Appropriately Remunerate Diversity and Flexibility 184 15.10.4 Encourage Accurate Forecasting and Dispatch Following 184 15.10.5 Ensure Settlement Time-Consistency 184 16 Gradual Transmission to Linked Swing-Contract Markets 185 16.1 Chapter Preview 185 16.2 A DAM Formulation Permitting Gradual Transition 187 16.3 Cost Function Preliminaries for the Transitional DAM189 16.4 MILP SCUC/SCED Optimization for the Transitional DAM 192 17 Swing-Contract Support for Integrated Transmission and Distribution Systems 201 17.1 Chapter Preview 201 17.2 Transactive Energy System Design for ITD Systems 203 17.3 Role of Distribution Utilities 207 17.4 An IDSO-Managed Bid-Based TES Design for Households 208 17.5 IDSOs as Grid-Edge Resource Aggregators 211 17.6 Swing-Contract Support for IDSO Participation in Wholesale Power Markets 212 18 Design Evaluation via the ITD TES Platform 213 18.1 Chapter Preview 213 18.2 Design Readiness Levels 213 18.3 An ITD TES Platform Permitting TES Design Evaluation 216 18.4 Illustrative Test Cases: Overview218 18.5 Illustrative Test Cases: Report 221 19 Potential Future Research Directions 227 20 Conclusion: The Dots Keep Connecting 231 Contents 7 21 Appendices 233 21.1 Quick-Reference Glossary of Standard Acronyms 233 21.2 Quick-Reference Glossary of Transmission System Terms 234 21.3 Quick-Reference Glossary of Economic Terms 235 21.4 Nomenclature for a Swing-Contract Market 236 21.5 Nomenclature for a Distribution Sys
• Edition: 1st
• Publisher Details: Hoboken : Wiley-IEEE Press
• Publication Date: 2020
• Extent: 1 online resource
• Subjects: 333.79323; Electric utilities; Electric utilities -- Costs; Options (Finance)
• Languages: English
• ISBNs: 9781119670148; 9781119670131
• Related ISBNs: 9781119670124
• Notes: Note: Description based on CIP data; resource not viewed.
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