Unified Approach to Balanced Pricing Strategies for Backup Reserve and Wheeling in Power Systems

Abstract

This paper shares the results of a recent industry-supported study with the aim to develop a practical pricing model for backup reserve and wheeling in the semi-open-market structure of power systems. Instead of a closed-loop optimization framework, a key requirement in the study is to develop a systematic what-if tableau-type analysis with full control over pricing parameters during negotiations among market entities. With the help of newly developed compact and elegant universal distribution factors, the pricing framework attains a balanced strategy that ensures perceived benefits to both the buyer and the seller. The model and the associated computerized algorithm deal collectively with diverse issues, including (1) fulfilling local firm real-power (and reactive-power) demand requirements, (2) fulfilling local power-reserve requirements, (3) buying firm real (and reactive) power from the grid, (4) buying reserve power from the grid, (5) exporting firm real-power (and reactive-power) demand to remote load centers through the grid, (6) exporting reserve power through the grid, (7) wheeling of firm-power demand to remote-owned sites using the grid, and (8) wheeling reserve power to remote-owned sites using the grid. Practical implementation features of the computerized algorithms are also discussed with an illustrative case example.