| ID | 177111 |
| Title Proper | Dynamic operating reserve procurement improves scarcity pricing in PJM |
| Language | ENG |
| Author | Lavin, Luke |
| Summary / Abstract (Note) | Competitive electricity markets can procure reserve generation through a market in which the demand for reserves is administratively established. A downward sloping or stepped administrative demand curve is commonly termed an operating reserve demand curve (ORDC). We propose a dynamic formulation of an ORDC with generator forced outage probabilities conditional on ambient temperature to implement scarcity pricing in a wholesale electricity market. This formulation improves on common existing methods used by wholesale market operators to articulate ORDCs by explicitly accounting for a large source of observed variability in generator forced outages, whereby for a fixed load, more reserves are required during times of extreme heat and cold to maintain a constant risk of reserve shortage. Such a dynamic ORDC increases social welfare by $17.1 million compared to current practice in the PJM Interconnection during a high load week in a welfare-maximizing electricity market with co-optimized procurement of energy and reserves. A dynamic ORDC increases reserve prices under scarcity conditions, but has minimal effects on total market payments. The results are directly relevant to the modeled two-settlement electricity market in PJM, which is currently undergoing enhancements to its ORDC.
|
| `In' analytical Note | Energy Policy Vol.147; Dec 2020 : p.111857 |
| Journal Source | Energy Policy 2020-12 147 |
| Key Words | Electricity Markets ; Operating Reserves ; Operating Reserve Demand Curve ; Correlated Failures ; Generating Availability Data System (GADS) ; Scarcity Pricing |