Discussion on Incentive Compatibility of Multi-Period Temporal Locational Marginal Pricing

Farhan Hyder, Bing Yan (), Peter Luh, Mikhail Bragin, Jinye Zhao, Feng Zhao, Dane Schiro and Tongxin Zheng
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Farhan Hyder: Department of Electrical and Microelectronic Engineering, Rochester Institute of Technology, Rochester, NY 14623, USA
Bing Yan: Department of Electrical and Microelectronic Engineering, Rochester Institute of Technology, Rochester, NY 14623, USA
Peter Luh: Department of Electrical and Computer Engineering, University of Connecticut, Storrs, CT 06269, USA
Mikhail Bragin: Department of Electrical and Computer Engineering, University of Connecticut, Storrs, CT 06269, USA
Jinye Zhao: Advanced Technology and Solutions, ISO New England, Holyoke, MA 01040, USA
Feng Zhao: Advanced Technology and Solutions, ISO New England, Holyoke, MA 01040, USA
Dane Schiro: Advanced Technology and Solutions, ISO New England, Holyoke, MA 01040, USA
Tongxin Zheng: Advanced Technology and Solutions, ISO New England, Holyoke, MA 01040, USA

Energies, 2023, vol. 16, issue 13, 1-9

Abstract: In real-time electricity markets, locational marginal prices (LMPs) can be determined by solving multi-interval economic dispatch problems to manage inter-temporal constraints (i.e., ramp rates). Under the current practice, the LMPs for the immediate interval are binding, while the prices for the subsequent intervals are advisory signals. However, a generator may miss the opportunity for higher profits, and compensatory uplift payments are needed at the settlement. To address these issues, the “temporal locational marginal pricing (TLMP)” that augments LMP by incorporating multipliers associated with generators’ reported ramp rates was developed. It was demonstrated that it would result in zero uplift payments, showing great potential as a good pricing scheme. Numerical examples also showed that “the generators had incentives to reveal their ramp rates truthfully”. In this paper, the incentive compatibility of TLMP with respect to ramp-rate reporting is discussed. Our idea is to develop numerical examples to investigate whether reporting the true ramp rates is the best option for generators. The results indicate that TLMP is not incentive compatible, and there are market-clearing scenarios where not reporting true ramp rates may be beneficial.

Keywords: multi-interval economic dispatch; locational marginal pricing; incentive compatibility; ramp-rate constraints (search for similar items in EconPapers)
JEL-codes: Q Q0 Q4 Q40 Q41 Q42 Q43 Q47 Q48 Q49 (search for similar items in EconPapers)
Date: 2023
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