Optimal voltage management for enhancing electricity market efficiency

In this paper we propose to schedule both real power and voltage settings of generators participating in electricity markets. This can be done by utilizing an extended AC Optimal Power Flow (AC X-OPF). This will provide a one-step method performed by the Independent System Operator (ISO) in charge of electricity market clearing; iterative decisions by the ISO and the system operator ultimately responsible for reliable operation can be significantly reduced. Moreover, the locational marginal prices (LMPs) are straightforward to interpret, as these are the nodal prices based on physically deliverable bid clearing. It is shown using the PJM system that the economic gains are significant. In addition to reducing total generation cost, LMPs are much less volatile and always positive. Overall, optimizing generation voltages leads to a much better behaving and more efficient electricity market.