Distributed Optimization Algorithms for Inter-regional Coordination of Electricity Markets
In the US, seven regional transmission organizations (RTOs) operate wholesale electricity markets within three largely independent transmission systems, the largest of which includes five RTO regions and many vertically integrated utilities.
RTOs operate a day-ahead and a real-time market. In the day-ahead market, generation and demand-side resources are optimally scheduled based on bids and offers for the next day. Those schedules are adjusted according to actual operating conditions in the real-time market. Both markets involve a unit commitment calculation, a mixed integer program that determines which generators will be online, and an economic dispatch calculation, an optimization determines the output of each online generator for every interval and calculates locational marginal prices (LMPs).
The use of LMPs for the management of congestion in RTO transmission systems has brought efficiency and transparency to the operation of electric power systems and provides price signals that highlight the need for investment in transmission and generation. Through this work, we aim to extend these efficiency and transparency gains to the coordination across RTOs. Existing market-based inter-regional coordination schemes are limited to incremental changes in real-time markets.
We propose a multi-regional unit-commitment that enables coordination in the day-ahead timeframe by applying a distributed approach to approximate a system-wide optimal commitment and dispatch while allowing each region to largely maintain their own rules, model only internal transmission up to the boundary, and keep sensitive financial information confidential. A heuristic algorithm based on an extension of the alternating directions method of multipliers (ADMM) for the mixed integer program is applied to the unit commitment.The proposed coordinated solution was simulated and compared to the ideal single-market scenario and to a representation of the current uncoordinated solution, achieving at least 58% of the maximum potential savings, which, in terms of the annual cost of electric generation in the US, could add up to nearly $7 billion per year. In addition to the coordinated day-ahead solution, we develop a distributed solution for financial transmission rights (FTR) auctions with minimal information sharing across RTOs that constitutes the first known work to provide a viable option for market participants to seamlessly hedge price variability exposure on cross-border transactions.