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Transitioning from fossil fuel dominated power systems to high penetrations of intermittent renewable generation is affecting classical electricity market designs. Here, a method is proposed to model and assess the absence of co-optimization of energy and reserve that prevails in the European system. Co-optimization is formulated through an optimization problem (COM), and its absence as an equilibrium problem (EQM) built on Karush-Kuhn-Tucker conditions of agents’ optimization and market clearing equations. EQM cannot be reformulated as a single optimization problem. Market distortions are identified by comparing the complementarity conditions of both models. These are then discussed on system with Feed in Premium to wind generation. Parameters in the models allow to represent different market configurations regarding: available wind generation, Feed in Premium to wind, generators’ risk aversion, and required reserve from wind generation. [ABSTRACT FROM AUTHOR]

Convex hull pricing is a well-documented method for coping with the non-existence of uniform clearing prices in electricity markets with non-convex costs and constraints. We revisit primal and dual methods for computing convex hull prices, and discuss the positioning of existing approximation methods in this taxonomy. We propose a dual decomposition algorithm known as the Level Method and we adapt the basic algorithm to the specificities of convex hull pricing. We benchmark its performance against a column generation algorithm that has recently been proposed in the literature. We provide empirical evidence about the favorable performance of our algorithm on large test instances based on PJM and Central Europe. [ABSTRACT FROM AUTHOR]