A novel approach to transmission constraint pricing

Abstract

The locational marginal price (LMP) is critical information provided by real-time market clearing engines. Under congestion situations, transmission constraint prices affect the LMP substantially. Usually, shadow price (SP) of a transmission constraint is considered as the constraint price. When a transmission constraint is violated, its SP will be set by the penalty price. As the penalty price is a pre-assigned high price used for penalizing constraint violations, it usually does not have monetary value to the market clearing. To prevent the LMP being contaminated by the penalty prices, it's highly desired by regional transmission organizations (RTOs) that the transmission constraint price shall be set by the physical marginal resources for constraint control. In this paper, a novel approach is proposed to calculate the price of violated transmission constraints. Case studies are conducted with PJM real-time production cases. The results demonstrate the effectiveness and high efficiency of the proposed approach. Currently, the approach has been used in PJM real-time production system for transmission constraint pricing.