Pricing mechanism for real-time balancing in regional electricity markets

We consider the problem of designing a pricing mechanism for precisely controlling the real-time balance in electricity markets, where retail brokers aggregate the supply and demand of a number of individual customers, and must purchase or sell power at the wholesale level such that the total supply matches total demand. This is typically done for future time periods by buying and selling power, and by setting variable prices for retail customers. In real time, balancing must be done through purchase of regulating services, and by remotely controlling portions of their retail customer loads and sources. We enumerate the desirable properties of a market-based balancing mechanism, and analyze the applicability of known theory in two scenarios: a baseline scenario in which brokers have no ability to manipulate their customers’ supply and demand, and a single-period scenario with controllable loads. The latter provides promising results for a scenario that takes interactions among time periods into account.