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Article
Derivation of Locational Marginal Prices for Restructured Wholesale Power Markets
Journal of Energy Markets
  • Haifeng Liu, California Independent System Operator Corporation
  • Leigh Tesfatsion, Iowa State University
  • Ali A. Chowdhury, California Independent System Operator Corporation
Document Type
Article
Publication Version
Published Version
Publication Date
1-1-2009
Abstract
Although locational marginal pricing (LMP) plays an important role in many restructured wholesale power markets, the detailed derivation of LMP as it is actually used in industrial practice is not readily available. This lack of transparency greatly hinders the efforts of researchers to evaluate the performance of these markets. In this paper, different alternating current and direct current optimal power flow models are presented to help us understand the derivation of LMP. As a byproduct of this analysis, we are able to provide a rigorous explanation of the basic LMP and LMP-decomposition formulas (neglecting real power losses) that are presented without derivation in the business practice manuals of the US Midwest Independent System Operator.
Comments

This is an article from Journal of Energy Markets 2 (2009): 3. Posted with permission.

Copyright Owner
Incisive Media
File Format
application/pdf
Citation Information
Haifeng Liu, Leigh Tesfatsion and Ali A. Chowdhury. "Derivation of Locational Marginal Prices for Restructured Wholesale Power Markets" Journal of Energy Markets Vol. 2 Iss. 1 (2009) p. 3 - 27
Available at: http://works.bepress.com/leigh-tesfatsion/51/