We consider a market in which suppliers with asymmetric capacities and asymmetric marginal and fixed costs compete to satisfy a deterministic and inelastic demand of a commodity in a single period. The suppliers bid their costs to an auctioneer who determines the optimal allocation and the resulting payments, a typical situation in deregulated electricity markets. Under classical marginal-cost pricing, the non-convexity of the total cost may result in losses for some suppliers because they may fail to recover their fixed cost through commodity payments only. To address this problem, various pricing schemes that lift the price above marginal cost and/or provide side-payments (uplifts) have been proposed in the literature. We review several of these schemes, also proposing a new variant, in a two-supplier setting. We derive closed-form expressions for the price, uplifts, and profits that each scheme generates that enable us to analytically compare these schemes along these three dimensions. Our analysis complements known numerical comparisons available in the literature. We extend some of our analytical comparisons to the case of more than two suppliers and discuss extant numerical comparisons for this case. Further, we present known results concerning the potential for supplier strategic bidding behavior in the context of the considered pricing schemes, emphasizing when possibilities for market manipulation exist.

No abstract

This two-part paper considers the day-ahead operational planning problem of a radial distribution network hosting Distributed Energy Resources (DERs) including Solar Photovoltaic (PV) and storage-like loads such as Electric Vehicles (EVs). We estimate dynamic Distribution nodal Location Marginal Costs (DLMCs) of real and reactive power and employ them to co-optimize distribution network and DER schedules. In Part I, we develop a novel AC Optimal Power Flow (OPF) model encompassing transformer degradation as a short-run network variable cost, and we decompose real/reactive power DLMCs into additive marginal cost components related to (i) the costs of real/reactive power transactions at the T&D interface/substation, (ii) real/reactive power marginal losses, (iii) voltage and (iv) ampacity congestion, and (v) a new transformer degradation marginal cost component. Our detailed transformer degradation model captures the impact of incremental transformer loading during a specific time period, not only on its Loss of Life (LoL) during that period, but also during subsequent time periods. To deal with this phenomenon, we develop methods that internalize the marginal LoL occurring beyond the daily horizon into the DLMCs evaluated within this horizon. In Part II, we use real distribution feeders to exemplify the use of DLMCs as financial incentives that convey sufficient information to optimize Distribution Network, and DER (PV and EV) operation.

No abstract

No abstract