Locational Pricing of Uncertainty Based on Robust Optimization

With the increasing penetration of renewables, power systems have to operate with greater flexibility to address the uncertainties of renewable output. This paper develops an uncertainty locational marginal price (ULMP) mechanism to price these uncertainties. They are denoted as box deviation intervals as suggested by the market participants. The ULMP model solves a robust optimal power flow (OPF) problem to clear market bids, aiming to minimize the system cost as a prerequisite that the reserve margin can address all the relevant uncertainties. The ULMP can be obtained as a by-product of the optimization problem from the Lagrange multipliers. Under the ULMP mechanism, renewables and consumers with uncertainty will make extra payments, and the thermals and financial transmission right (FTR) holders will be compensated. It is further shown that the proposed mechanism has preferable properties, such as social efficiency, budget balance and individual rationality. Numerical tests are conducted on the modified IEEE 5-bus and 118-bus systems to demonstrate the merits and applicability of the proposed mechanism.

Automated summary

This paper develops an uncertainty locational marginal price (ULMP) mechanism to price uncertainties related to renewables in power systems. It aims to minimize system costs and ensure reserve margins cover all uncertainties, with renewables and consumers with uncertainty making extra payments while thermals and FTR holders are compensated. Numerical tests on IEEE systems demonstrate the mechanism's benefits and applicability.