A bi-level electricity market clearing process was developed for energy and reserve allocation in the day-ahead market using AC Optimal Power Flow (ACOPF). An energy-consuming entity (ECE) which does not want its cleared demand to be curtailed, even if any contingency occurs, purchases power from the reserve market at a higher rate. The proposed model helps the ECE to secure a reserve market allocation at the price of the energy market in the real-time market settlement. Various market models were formulated for the evaluation of locational marginal pricing (LMP) in the energy market and locational contingency marginal reserve pricing (LCMRP) in the reserve market. The impact of wind farms on LMP, LCMRP, and negative LMP was analyzed. The increase in demand requirement in the deregulated environment was balanced in the proposed models by the thermal–wind coordination dispatch. The market models were illustrated with the IEEE 30 bus system.

Auction mechanism analysis provides favourable economic outcomes for key stakeholders involved in the restructured power market. Real power pricing based on locational marginal pricing has been implemented in the electricity market worldwide. In this study, the optimal power flow is considered to minimise the operating cost of the active power generation in the ex-ante energy market and an augmented optimal power flow in the ex-ante reserve market. The double-sided auction mechanism has better control over the energy and reserve markets, enhancing social welfare in the restructured power markets. Singleand double-sided auction mechanisms are considered to analyse the allocation and pricing economics in the ex-ante day-ahead energy and ex-ante day-ahead reserve markets. Locational marginal pricing is calculated and analysed for both the on-and off-peak demand periods. The proposed auction model was validated using an IEEE 30-bus power system. The benefits of the double-sided auction are assessed from technical and economic perspectives. INTRODUCTION Motivation and necessityThe vertically integrated power industry, in which power generation, transmission, and distribution are bundled together as a utility to serve consumers, was restructured in the late 1980s to reduce the price of electricity. The deregulated electricity market mainly focuses on important aspects, such as developing a competitive market, improving system efficiency, and enhancing system standards. Thus, the monopolistic vertically integrated market structure is transformed into a market-driven/oriented competitive structure. Energy and reserve markets are important components of the restructured power market. The energy market provides a platform for GENCOs (Generation Company) and DISCOs (Distribution Company), which are stakeholders in the electricity market. However, uncertainties may occur, result in a loss of the power balance in the system. Therefore, the reserve market is set up to address the balancedisruptive uncertainties intrinsic to the power system. This jointThis is an open access article under the terms of the Creative Commons Attribution License, which permits use, distribution and reproduction in any medium, provided the original work is properly cited.