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 TypeConference Proceedings
Year of Publication2001
AuthorsSiddiqui, Afzal S., Chris Marnay, and Mark Khavkin
Conference NameHawaii International Conference on System Sciences
Date Published1/2001
Conference LocationBerkeley
Keywordselectricity markets and policy group, energy analysis and environmental impacts department, market mechanisms for reliability management, transmission system reliability, transmission system reliability publications

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.