Spot Pricing of Electricity and Ancillary Services in a Competitive California Market

TitleSpot Pricing of Electricity and Ancillary Services in a Competitive California Market
Publication TypeReport
Year of Publication2000
AuthorsSiddiqui, Afzal S., Chris Marnay, and Mark Khavkin
Pagination10
Date Published11/2000
PublisherLBNL
CityBerkeley
Keywordselectricity markets and policy group, energy analysis and environmental impacts department, transmission system reliability, transmission system reliability publications
Abstract

Typically, in competitive electricity markets, the vertically integrated utilities that were responsible for ensuring system reliability in their own service territories, or groups of territories, cease to exist. The burden falls to an independent system operator (ISO) to ensure that enough ancillary services (AS) are available for safe, stable, and reliable operation of the grid, typically defined, in part, as compliance with officially approved engineering specifications for minimum levels of AS. In order to characterize the behavior of market participants (generators, retailers, and an ISO) in a competitive electricity market with reliability requirements, spot markets for both electricity and AS are modeled. By assuming that each participant seeks to maximize its wealth and that all markets clear, we solve for the optimal quantities of electricity and AS traded in the spot market by all participants, as well as the market clearing prices for each.

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