Value of Flexible Resources, Virtual Bidding, and Self-Scheduling in Two-Settlement Electricity Markets With Wind Generation—Part II: ISO Models and Application

In Part II of this paper, we present formulations for three two-settlement market models: Baseline cost-minimization (<inline-formula><tex-math notation="LaTeX">${\textit{Stoch}}$</tex-math></inline-formula>-<inline-formula> <tex-math notation="LaTeX">${\textit{Opt}}$</tex-math></inline-formula>); and two sequential market models in which an independent system operator (ISO) runs real-time (RT) balancing markets after making day-ahead (DA) generating unit commitment decisions based upon deterministic wind forecasts, while virtual bidders arbitrage the two markets ( <inline-formula><tex-math notation="LaTeX">${{\textit{Seq}}}$</tex-math></inline-formula> and <inline-formula> <tex-math notation="LaTeX">${{\textit{Seq}}}$</tex-math></inline-formula>-<inline-formula><tex-math notation="LaTeX"> ${{SS}}$</tex-math></inline-formula>). The latter two models differ in terms of whether some slow-start generators can self-schedule in the DA market while anticipating probabilities of RT prices. Models in <inline-formula> <tex-math notation="LaTeX">${{\textit{Seq}}}$</tex-math></inline-formula> and <inline-formula> <tex-math notation="LaTeX">${{\textit{Seq}}}$</tex-math></inline-formula>-<inline-formula><tex-math notation="LaTeX"> ${{SS}}$</tex-math></inline-formula> build on components of the two-settlement equilibrium model (<inline-formula> <tex-math notation="LaTeX">${\textit{Stoch}}$</tex-math></inline-formula>-<inline-formula><tex-math notation="LaTeX"> ${{MP}}$</tex-math></inline-formula>) defined in Part I of this paper [J. Kazempour and B. F. Hobbs, “Value of flexible resources, virtual bidding, and self-scheduling in two-settlement electricity markets with wind generation - Part I: Principles and competitive model,” <italic>IEEE Trans. Power Syst.</italic>, vol. 33, no. 1, pp. 749–759, Jan. 2018]. We then provide numerical results for all four models. A simple single-node case illustrates the economic impacts of flexibility, virtual bidding, and self-schedules, and is followed by a larger case study based on the 24-node IEEE reliability test system. Their results confirm that flexible resources, including fast-start generators and demand response, can reduce expected costs in a sequential two-settlement market. In addition, virtual bidders can also improve the functioning of sequential markets. In some circumstances, virtual bidders (together with self-scheduling by slow-start generators) enable deterministic ISO DA markets to obtain the least (expected) cost unit commitments.