Energy and reserve market designs with explicit consideration to lost opportunity costs

The primary goal of this work is to investigate the basic energy and reserve dispatch optimization (cooptimization) in the setting of a pool-based market. Of particular interest is the modeling of lost opportunity cost introduced by reserve allocation. We derive the marginal costs of energy and reserves under a variety of market designs. We also analyze existence, algorithm, and multiplicity of optimal solutions. The results of this study are used to support the reserve market design and implementation in ISO New England control area. Index Terms--Electricity market, marginal pricing, optimization, power systems, spinning reserve.