Pricing of emergency and demand response resources

As aging coal-fired capacity retires following EPA rules, some RTO/ISOs are facing tightening supply margins, and seldom-used emergency only resources such as Load Modifying Resource may have to be deployed. The injection of emergency capacity, however, can result in price depression, and the uneconomic price signals may further lead to participant actions that endanger reliable grid operations. It has been a challenge to price emergency and demand response resources since they cannot respond to an infinitesimal change in demand and thus could not set price under the current pricing. Also, their monetary offer may not be applicable or can be cheaper than non-emergency resources. In this paper, an emergency pricing construct is developed to prevent the uneconomic price suppression by establishing Proxy Offer to appropriately value emergency resources and leveraging the ELMP method to allow demand response and other emergency resources to set prices. Numerical results show effective solution of price depression.