Engineering Approach to Model and Compute Electric Power Markets Settlements

J. Kumar and V. Petrov (USA)

Keywords

Power markets deregulation, settlements, linear algebra, backoffice accounting.

Abstract

In the Independent System Operator (ISO) organizations, the back-office accounting settlement activities are an integral part of the market operations. One of the ways of measuring ISO market design correctness is to analyze how well market price signals create incentives or penalties for creating an efficient market to achieve the market design goals. The market settlement rules are an important vehicle for implementing such price signals. Those signals are fed back to the participants via the settlement activities of the ISO. Until recently, ISO settlement activity has been treated as an extended manifestation of a standard, large-scale, back-office accounting problem. However, the high volume of data due to the increasing size of markets and constantly changing market designs, combined with the growing complexity of the wholesale energy settlement business rules, present unique engineering and computational challenges to today’s ISOs. This paper analyzes the problem and presents a practical engineering solution to the problem using an approach based on the mathematical formulation and modeling of large scale calculations. This paper also presents critical comments on various differences in settlement design approaches integral to electrical power market design, as well as further areas of development.

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