Effects of co-optimization of energy and reserves on prices

With a growing interest for the participation of Electric Vehicles (EV) in energy markets, there is a need to understand the effects EV might have on energy markets. In this paper we show that the co-optimization among reserves and energy in certain market structures can give counter intuitive results. Typically, markets operate such that a decrease in demand results in a decrease in prices. But because of the co-optimization of a common resource among multiple market services, this outcome need not always be true. In this paper we show that a particular "either-or" constraint on the allocation of a resource among two services can lead to an increase in prices for both services with a decrease in demand. This is intended to be analogous to certain reserve and regulation markets, an analysis of which alerted us to this peculiar property while analyzing the inclusion of EV in a regulation market.