On the Primal UC Formulation Dependence of Convex Hull Pricing

Abstract

Convex hull pricing provides a potential solution for reducing out-of-market payments in wholesale electricity markets. This article revisits the theoretical construct of convex hull pricing and explores its dependence on the primal formulation of a Unit Commitment (UC) problem. Namely, primal UC formulation practices for speeding up the solution of the scheduling problem, if transferred to the pricing problem, may affect the convex hull prices. A conceptual exposition of the issue is provided along with discussion on two types of such practices commonly observed in electricity markets. Sufficient conditions under which convex hull prices will be preserved by a different UC formulation are also explored. These findings contribute to a better understanding of convex hull pricing and demonstrate the importance of continued theoretical research into the method.