Spot pricing of energy and reserve under market power

It is well known that given a network that can become constrained on voltage or real power flows, reserves must also be spatially located in order to handle all credible contingencies. However, to date, there is no credible science based method for assigning and pricing reserves in this way. In this paper, we propose an integrated energy and reserve market. The proposed model has developed an innovative spinning reserve biddable reserve calculation scheme which is dynamic and nature, independent of the energy market auctions and the full ac OPF is used to determine the spinning reserve procurement while taking into account system security constraints. Unlike other pricing and scheduling methods in use, which are usually ad-hoc and are based on engineering judgment and experience, this proposed formulation is likely to perform better in restructured markets when market power is a potential problem. An illustrative example of an IEEE 30 bus system is used to introduce concepts and present results.