Market Implications and Pricing of Dynamic Reserve Policies for Systems With Renewables

Static reserve policies are used within security-constrained unit commitment (SCUC) and security constrained economic dispatch (SCED) to ensure reliability. A common policy is that 10-min reserve must exceed the largest contingency. However, this condition does not guarantee reliability because voltage and thermal limits can hinder reserve deliverability. Many operators use zonal reserve markets to ensure reserves are dispersed across the grid. Such zonal models attempt to anticipate transmission bottlenecks, which is a difficult task when the future system state is uncertain. This paper examines the market implications of dynamic reserve policies used to mitigate uncertainty from renewable resources and contingencies. We study the market implications of policies recently proposed in the literature, such as hourly zones within day-ahead SCUC and an algorithm that formally disqualifies reserves that are expected to be undeliverable. A locational reserve pricing scheme is also proposed in connection with scenario-based reserve disqualification. Analysis on the RTS-96 test case shows that dynamic zones and reserve disqualification, along with the proposed compensation scheme, help direct reserve payments toward resources that more effectively respond to contingencies.