Ancillary services management in a restructured electric power industry

This work investigates a new approach to quantify ancillary services in a restructured electric power industry. One of the important ancillary services in power systems is spinning or generation reserve. In the traditional regulated electric utility, the amount of spinning reserve power requirement was determined by engineering experience without taking into consideration the value of service. The spinning reserve power requirement was a heuristic or “rule-of-thumb” approach. This engineering practice has been followed in the restructured power system.; We propose a new approach to manage ancillary services requirements based on market principles. We identify the fundamental characteristics for ancillary services and market structure for reliable power system operation. In particular, we examine the quantification of spinning reserve power requirement in the power system. We view the provision of spinning reserves as an insurance against generator outage. We show that sellers of spinning reserves will supply an amount based on the cost of the supply and the expected compensation to be paid when an outage occurs. We also show that buyers or consumers of spinning reserves will derive their demand curve based on the cost and the perceived shedding of load. We formulate mathematical models for the market participants in three cases to establish the new framework. First, we derive a single-seller single-buyer case to represent the aggregate supply and aggregate demand. Then we proceed to derive cases for multiple sellers and buyers. Applying the models, we present illustrative examples for each case in a simplified power system. We prove under certain conditions the equivalence between cases. Finally, we discuss concepts of decentralization based on the market coordinator in the restructured power system.