Balancing Supply and Demand Under Mixed Pricing Rules in Multi-Area Electricity Markets

Market clearing has always been an issue of great interest and research as liberalized electricity markets evolved over time in many countries. As trading in electricity evolves rapidly, multi-area power exchanges appear to substitute the local markets. The tie-lines constitute a significant parameter in multi-area power exchanges, since congestion leads to price differentiation. Prices are affected by physical (e.g., network) constraints, yet they should sometimes follow regulatory policy rules, which do not necessarily reflect or depend on physical characteristics. Until now, all approaches in clearing a multi-area power dispatch (or a multi-area market) are based on a zonal or nodal pricing model, which is applied uniformly to both production and demand within the same zone (or at each node). These approaches are not able to deal with complex pricing rules, which impose price discrimination for supply or demand entities within the same area. This paper presents a mathematical approach for the solution of a multi-area dispatch, in which production and demand of the same area may be cleared in different prices. The main principle is the formulation of a mixed complementarity problem for the system equilibrium conditions, in which supply and demand are associated to explicitly or implicitly defined prices. Illustrative implementations and test results for a simple five-zone system and the 73-bus IEEE RTS-96 are presented.