Using Mathematical Programming for Electricity Spot Pricing

Abstract

Recent moves around the world to introduce competition into electricity markets have created a need for mechanisms to determine electricity spot prices which provide good incentives for market coordination. Duality theory suggests that such prices can be found by solving a mathematical program. We derive implicit prices corresponding to an actual half‐hourly dispatch of a full a.c. power system, and discuss the application of spot pricing in New Zealand and the United States.