Balance economic efficiency and operation risk

Summary form only given. Electricity markets have been moving on from infancy toward maturity. Experiences have shown that competitive market operation needs to integrate with secure and reliable system operation; otherwise, market failure and/or blackout may happen. This panel will review PJM´s practice on how to achieve equilibrium between economic efficiency and system operation risk. In PJM´s competitive market operation, economic efficiency is established based on system operating reliability. LMP-based congestion management and ancillary service markets were designed and implemented to support system security and reliability through price signals. New concept of perfect dispatch has been developed to measure the performance and efficiency of real-time market and system operation. Perfect dispatch refers to the hypothetical least production cost commitment and dispatch, achievable only if all system conditions, such as demand, unit availability, interchanges and transmission outages etc., would be known and controllable in advance. It is currently one of the important corporate goals at PJM. Also, it can be used as after-fact analysis tool to provide feedback to system operators to improve real-time unit commitment and dispatch. Based on the operation experiences, major factors impacting saving and economic system operation include the following: 1.) Using fast start units for transmission control. 2.) Unit not following dispatch well.3.) Conservative system operation. 4.) Other factors, such as load forecasting error, operator manual actions, and system uncertainties.