A novel approach to transmission constraint pricing

The locational marginal price (LMP) is critical information provided by real-time market clearing engines. Under congestion situations, transmission constraint prices affect the LMP substantially. Usually, shadow price (SP) of a transmission constraint is considered as the constraint price. When a transmission constraint is violated, its SP will be set by the penalty price. As the penalty price is a pre-assigned high price used for penalizing constraint violations, it usually does not have monetary value to the market clearing. To prevent the LMP being contaminated by the penalty prices, it´s highly desired by regional transmission organizations (RTOs) that the transmission constraint price shall be set by the physical marginal resources for constraint control. In this paper, a novel approach is proposed to calculate the price of violated transmission constraints. Case studies are conducted with PJM real-time production cases. The results demonstrate the effectiveness and high efficiency of the proposed approach. Currently, the approach has been used in PJM real-time production system for transmission constraint pricing.