New models for integrated short-term forward electricity markets

Abstract

In a typical short-term forward wholesale electricity market where products are auctioned sequentially, one often observes significant market inefficiency and price volatility-thus the growing impetus in developing integrated short-term forward markets where electric energy, reserves, and transmission capacity are auctioned simultaneously. Such markets need new computational methods and models for determining market clearing prices and physical (delivery/consumption) schedules. The purpose of this paper is to examine key aspects of current modeling and pricing methods in short-term forward wholesale electricity markets and to introduce new models suitable for clearing price-based markets of integrated trades of energy, reserve, and transmission. Specifically, an analysis of the impacts of various pricing rules and bidding requirements on market operations is presented, the selection of optimization objectives is discussed, and a new model of transmission congestion and multiproducts simultaneous auction is introduced. Examples are used where appropriate.