An Efficient Procedure for the Rational Buyer Approach for the Acquisition of Capacity-based Ancillary Services

This paper addresses the competitive procurement of capacity-based ancillary services (AS) in unbundled markets by the Independent Grid Operator (IGO). These AS include upward frequency control, load following and the range of reserve services, which may be procured from unloaded capacity offered by both on-line and off-line sources. The capacity-based AS are prioritized in order of ascending response times. Prioritization allows substitutability of the AS by automatically making the unused capacity of a higher priority AS usable for any lower priority AS without the need of submitting additional offers. This paper discusses the formulation of the auction structures for the acquisition of the prioritizable capacity-based AS and presents an efficient scheme for minimizing the costs incurred by the IGO by using the rational buyer procedure. The proposed scheme adopts effective discrete programming techniques that exploit the structural characteristics of the problem for handling the multi-auction formulation. The proposed bounding scheme takes fully advantage of critical physical constraints such as ramp rate, capacity limits, and inter-zonal constraints. The effectiveness and computational efficiency of the proposed scheme are illustrated and discussed with numerical examples.