Customer choice of reliability in spinning reserve procurement and cost allocation

Reliability is one of the main factors influencing customer loyalty in a competitive power industry. The system operator must ensure that there is sufficient spinning reserve to maintain system security. Contractually such commodity requires a willing buyer and a willing seller. A novel pool-based market clearing algorithm for spinning reserve procurement and the cost allocation associated with provision of spinning reserve among DisCos is developed in this paper. Rational buyer model is used for energy and reserve market model. In the proposed algorithm, generating units bid simultaneously to energy and spinning reserve markets and these markets are sequentially cleared. In such a market, DisCos declare their own energy requirement along with desired reliability level to ISO. The DisCospsila desired reliability levels are selected from a probabilistic framework designated as lost of load probability (LOLP) . Using the demand of each DisCo and its associated desired reliability level, the overall desired system risk level is determined. Then, market operator purchases spinning reserve commodity from the associated market such that the overall desired system reliability level is satisfied. A methodology is developed to fairly allocate the cost associated with provision of spinning reserve among DisCos based on their demand and desired reliability levels. The effectiveness of the proposed technique is examined and the results are presented using the IEEE-RTS.