A Comparison of Risk-constrained Mechanisms for Reserve Provision in Competitive Electricity Markets

Operating reserve assessment has become increasingly important in the new utility environment in which ancillary services have been assigned a value and purchased in a competitive market. This paper first presents a procedure for compulsory provision of spinning reserve using a risk-constrained cost-based mechanism and then proposes a competitive market structure for spinning reserve procurement. In both mechanisms, the electrical energy and spinning reserve are dealt with simultaneously because the procurement of reserve cannot be decoupled from the procurement of energy. Generators are paid the opportunity cost associated with their reduced energy because compulsion is financially unattractive among them. The transmission system reliability is considered in a simplified manner when computing composite system risk. The acceptable risk level is determined through cost-benefit analyses. In the proposed competitive market structure, the Independent System Operator (ISO) is responsible for reliability management and is thus responsible for purchasing sufficient reserve on behalf of the users of the system. The results are compared and discussed by application to the IEEE-RTS and the RBTS. The General Algebraic Modeling System (GAMS Rev. 140) is used to solve the mixed integer nonlinear co-optimization problems.