Energy and operating reserves procurement in presence of capacity limits

In this paper we make use of an agent-based approach to model strategic behavior of supply units in an simultaneous clearing of spot energy and operating reserve power/energy. Generation units submit bids for energy and reserve power capacity as well as reserve energy. The test system shows the incidence of capacity limits as well as remote renewable energy penetration. The contributions of this paper are twofold: First, in contrast to the literature in agent-based electricity market simulation frameworks with discrete action sets we apply a “continuous” action set mechanism. The algorithm is derived from the common Q-learning approach. Second we show in a representative North-South model with substantial renewable energy-infeed and capacity limits the incidence of Locational Marginal Pricing on energy as well as reserve power markets in combination with strategically acting generation units.