Utilizing the redundant constraints for the uplift payment elimination

Vadim Borokhov ()
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Vadim Borokhov: LLC “En + Development”

Operational Research, 2022, vol. 22, issue 2, No 19, 1377-1402

Abstract: Abstract A power market with non-convexities may not have an equilibrium price for power that provides economic stability of the centralized dispatch outcome. In this case, the market players are entitled to receive the uplift payments that compensate the economic profit lost when following the centralized dispatch. We consider a special class of the (possibly non-linear) redundant constraints that are redundant not only on the feasible set of the centralized dispatch optimization problem (and, therefore, do not change the centralized dispatch outcome) but also on the larger set obtained when the power balance constraint is relaxed. We show that the Lagrangian relaxation of these redundant constraints may reduce the uplift payments without changing the duality gap. For any given market price (or a pricing algorithm that sets the producer revenue as a function of its output volume) in a uninode multi-period power market with fixed load, we explicitly construct a family of the redundant constraints that do not change the maximum profit of the producer and result in zero uplift payment. We show that the introduction and subsequent Lagrangian relaxation of just one redundant constraint in the centralized dispatch problem suffice to eliminate the uplift payments for all the producers. The results can be straightforwardly generalized to multi-node power markets with the price-sensitive load.

Keywords: Power pricing; Pricing non-convexities; Redundant constraints (search for similar items in EconPapers)
Date: 2022
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DOI: 10.1007/s12351-020-00576-4

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