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

Author

Listed:
  • 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
    P. Luh, who was the co-supervisor of this project, tragically passed away in November 2022. He was a professor emeritus of the Department of Electrical and Computer Engineering, University of Connecticut, Storrs, CT 06269, USA, and with the Department of Electrical Engineering, National Taiwan University, Taipei 10617, Taiwan. As a tribute to our dear friend and mentor, the remaining coauthors dedicate this paper to commemorating Dr. Luh’s contributions and legacy.)

  • 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)

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.

Suggested Citation

  • Farhan Hyder & Bing Yan & Peter Luh & Mikhail Bragin & Jinye Zhao & Feng Zhao & Dane Schiro & Tongxin Zheng, 2023. "Discussion on Incentive Compatibility of Multi-Period Temporal Locational Marginal Pricing," Energies, MDPI, vol. 16(13), pages 1-9, June.
    • Handle: RePEc:gam:jeners:v:16:y:2023:i:13:p:4977-:d:1180461
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