Pricing Implications of Transmission Security Modeling In Electric Energy Markets

This paper discusses the pricing implications of modeling transmission security constraints in market clearing models. Most market operators include transmission security constraints in optimization models that are used to determine the commitment and dispatch schedules for both the day ahead and the real time markets. The inclusion of transmission security constraints leads to the rise of a post transmission contingency congestion component in the nodal market clearing prices. Most contemporary market models follow an approach that does not allow for a re-dispatch in generation after the occurrence of a transmission contingency, attempting to arrive at a single market solution that is transmission feasible for both the base case and all modeled post-contingency network models. A theoretical analysis of the pricing implications of transmission security modeling in energy market clearing models (including a model allowing for re-dispatch) is presented by leveraging duality theory.