A case study of network characteristics based optimal pricing and dispatch

In this paper, the nodal pricing and dispatch function of the independent system operator (ISO) in a pool based electricity market is modeled and solved using a new algorithm based on linear convex optimisation. The algorithm finds optimal nodal prices, and real and reactive power dispatch considering line flow limits, real power loss along the lines and reactive power capability of generators. The price-quantity bids by the generators and consumers are used to model a piece-wise linear objective function for real power dispatch. Real and reactive power are dispatched using a decoupled load flow method and an adjustment algorithm is used to handle decoupling errors. The algorithm was used to solve a 17-node test problem. Dispatch depends on the security constraints and the total industry surplus decreased with line flow restrictions. Impact of switching some real power bids to the reserve market depends on the location of the bid switching