Converting system limits to market signals

This paper compares methods for converting system limits into market signals. One classification of methods is according to reliability driven (TLR and similar) versus market driven (LMP and similar) methods. A second classification is according to direct versus indirect methods. Direct methods deal with individual limits and constraints. Indirect methods include various ways of converting one type of limit to another, equivalent limit for purposes of making the handling of the limit more expeditious. An example of an indirect method is the conversion of 4 voltage limit to either a flow limit or an interface limit. Another example is the use of flow limits on interfaces as surrogates for stability limits. These transformed limits are often represented by nomograms. Conversion of one type of limit to another and the construction of nomograms has the advantage of reducing the problem of imposing system limits within a market context to a "previously solved" market problem. If a market already has learned how to cope with an import limit into a load pocket, conversion of a voltage limit into a load pocket import limit makes it easy for a market to react and respond to the condition. However, any conversion from one type of limit to another,entails an approximation. This paper discusses the nature of some of these approximations.