Short run marginal cost pricing for fast responses on the Smart Grid

The Smart Grid includes automatic responses to events on the grid, responses such as demand side management, the operation of storage devices, and the control of reactive power sources. Many of these actions will involve one party obtaining automated assistance from another party, often in a fraction of a second, and generally in time periods shorter than the settlement periods of conventional ISO auctions. Wide Open Load Following (WOLF) is a short interval formulary auction for unscheduled flows of electricity that produces short run marginal cost prices. WOLF can supplement the conventional ISO auctions or can be slightly enhanced for use in cashing out the unscheduled flows on systems that do not have a conventional bid based auctions. The independent variables in the WOLF formulas are system measurements such a frequency, inadvertent interchange, line flow, and voltage. The WOLF formulas can set prices as often as these system measurements are made.