Observations on Locational Marginal Price in a Double Auction Deregulated Power System

Abstract

In a deregulated power system double-side auction mechanism is most effective for market clearing and settlement of primary transaction and is used in many countries. Market Clearing Price (MCP) and Market Clearing Quantity (MCQ) are obtained by the intersection of aggregated supply offer curve and aggregated demand bid curve. To take the effect of transmission loss, congestion and to efficiently use both the transmission grid and generation resources by providing correct economic signals, a Locational Marginal Price (LMP) was developed and can be obtained using AC OPF or DC OPF model. The current practice is to use the DC OPF model and Linear Programming solution to obtain the LMP values. When there is no congestion in the network this paper proposes a method to obtain the LMP for a double auction market with transmission loss without actually carrying out OPF but by using the corrected aggregated supply offer curve and corrected aggregated demand bid curve. This paper also uses a modification factor for normalizing location specific prices, offers or bids to any reference location. Using this modification factor a flexible way to arrive at an equivalent location specific price using the first rejected offer or bid price or any price in between the bid – offer gap is proposed. In most discussions available in the literature the demand is fixed and not price responsive but in this paper all the discussions on generalized pricing rule to calculate LMP are with respect to the price responsive demands and by using the well known PJM five bus test system.
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