Economic impacts of security criterion compliance contribution to the panel “the effect of system security on electricity markets”

Market and system operations are tightly coupled in the restructured environment. Such coupling requires a thorough understanding of the interdependence between the market performance and the way the power systems are operated. There is a particular need to go beyond the qualitative characterization and to quantify the dependence of the market performance on the system security. In this work, we describe a general approach to quantify the monetary impacts of complying with a specified security criterion when the deployment of security control actions is fully taken into account. We illustrate the application of the proposed approach on the large-scale ISO- NE system to quantify the monetary impacts associated with changing from the current security criterion to two other criteria using the actual 2005 day-ahead data - the historical system model and the bids/offers submitted - with the actual market clearing methodology. Through this study, we gain important insights on the role of price-responsive demand and the selected security control action. An important finding of this study is that the economic efficiency of electricity markets need not decrease when the system is operated under a stricter criterion.