Towards a theory of optimal dispatch in the short run

In a typical liberalized wholesale electricity market, the output of controllable units is determined at regular intervals through a dispatch process. However, since the physical limits of power systems must be respected down to time scales shorter than the dispatch interval, in practice system operators must also be able adjust the output of controllable units over very short time frames - typically through the procurement and dispatch of reserves, ancillary services or balancing services. To date, the procurement and dispatch of balancing services has been guided by heuristics and rules of thumb. Yet the approach to the dispatch of balancing services can have a significant impact on the pre-contingent or system normal dispatch of the power system. In principle, improvements in the efficiency of the dispatch of balancing services could significantly improve the efficiency of the utilization of power system assets. This paper observes that the dispatch of balancing services should correspond to optimal dispatch in a dispatch process with a very short dispatch interval. We also identify a set of conditions which the procurement and dispatch of balancing services should satisfy and compare those conditions to the current arrangements for ancillary services in the Australian National Electricity Market.