The effect of demand elasticity on security prices for the PoolCo and multi-lateral contract models

Optimum power flows and security constrained power flows assume that customer demand is a fixed quantity. In the new competitive environment, it is necessary to assume that demand is elastic and will vary as a function of price. A critical element in any competitive model, whether it be a PoolCo or a multi-lateral contract model, is for a system operator to ensure reliability and feasibility of the power system operating point. Security pricing for feasibility was first advanced by Schweppe et al for the case of line flow constraints for a PoolCo model. Using geometry, this paper generalizes the approach to include any security constraint for a general competitive model. The paper discusses interpretations of security pricing and its possible implementation in Energy Management Systems.