Spot pricing of capacities for generation and transmission of reserve in an extended Poolco model

The Poolco model is emerging as one of the most acceptable options for organizing the spot market of electricity. Although the model represents a reasonable and safe transition from present industry practices to what is required in a competitive electricity market, many important issues remain to be resolved. In particular, issues regarding reliability related services are of a special concern to the industry. This paper is devoted to the issue of reserve service delivery and pricing. The Poolco model is extended in this paper to include spot pricing of reserve generation and transmission capacities, as well as demand side bidding. In our extended model, suppliers submit bids for power as well as for reserve capacities. A new formulation of the extended security constrained economic dispatch which allocates both power and reserve generation resources is presented in this paper. The dispatch of the resources is constrained by limitations of system transmission capacities. The proposed formulation is considered to be relevant not only in the Poolco, but in a more general setup. An illustrative example is used to introduce concepts and present results. Finally, some general issues regarding formats of proposals, balance of payments and uniqueness of the prices that apply equally to both the original and extended Poolco models are discussed.