Simultaneous Clearing of Energy and Reserves in Multi-Area Markets Under Mixed Pricing Rules

The integration of the spot electricity markets in Europe shall lead to multi-area power exchanges that will substitute the local markets. In such scheme, market prices are affected by physical (e.g., network) constraints, yet they should sometimes follow regulatory policy rules, which do not necessarily reflect or depend on physical characteristics. In some cases, complex pricing rules should be implemented, which impose price discrimination for supply and demand entities within the same area. The methodology presented in this paper enables the balancing of supply and demand in a multi-area market considering energy and reserve bids, under complex pricing rules, which mix energy and reserve prices. A demand bid corresponds to the whole cost a demand entity is willing to pay for its participation in the energy market, including the cost for the procurement of the necessary reserves. The approach attains price integration of energy and reserves markets, simultaneous settlement of energy and reserves, and significant decrease of the payments through the uplift accounts. The main principle is the formulation of a mixed complementarity problem for the system equilibrium conditions, in which supply and demand are associated to explicitly or implicitly defined prices, which may be different even in the same zone.

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