A New Swing-Contract Design for Wholesale Power Markets

Presented by Leigh Tesfatsion, Ph.D.
Research Professor of Economics, Professor Emerita of Economics, and
Courtesy Research Professor of Electrical & Computer Engineering
Iowa State University

2:00 pm EST
December 17, 2020

Zoom link: https://lehigh.zoom.us/j/97447746828?pwd=cHBaeGtzRWJSNjQ4Y2h0S1k1VG8rdz09

Abstract
The need for flexible dependable reserve provision in electric power systems has dramatically increased in recent years.  Growing reliance on variable energy resources and greater encouragement of demand-side participation have led to greater uncertainty and volatility of net load. Consequently, system operators are finding it harder to secure reserve with sufficient flexibility to permit the continual balancing of net load, a basic requirement for power system reliability.  This presentation reconsiders the design of wholesale power markets in light of these concerns.  Four design principles are stressed:
 1. Wholesale power markets must necessarily be forward markets due to the speed of real-time operations;
 2. Only one type of product can effectively be offered in a wholesale power market: namely, reserve, an insurance product offering availability of net load balancing services for future real-time operations;
 3. Net load balancing services offered into wholesale power markets primarily take the form of power-paths that can be dispatched at specific grid locations over time;
 4. All dispatchable resources should be permitted to compete for the provision of power-paths in wholesale power markets without regard for irrelevant underlying technological differences.
 If these four principles are accepted, current trade and settlement arrangements for wholesale power markets need to be fundamentally altered.  This presentation proposes a new linked swing-contract market design, consistent with principles (1)-(4), that could meet the needs of centrally-managed wholesale power markets better than currently implemented designs.

Biosketch
Leigh Tesfatsion received the Ph.D. degree in economics from the University of Minnesota, Mpls., in 1975, with a minor in mathematics. She is Research Professor of Economics, Professor Emerita of Economics, and Courtesy Research Professor of Electrical & Computer Engineering, all at Iowa State University. Her principal current research areas are electric power market design and the development of Agent-based Computational Economics (ACE) platforms for the performance testing of these designs. She is the recipient of the 2020 David A. Kendrick Distinguished Service Award from the Society for Computational Economics (SCE) and an IEEE Senior Member. She has served as guest editor and associate editor for a number of journals, including the IEEE Transactions on Power Systems, the IEEE Transactions on Evolutionary Computation, the Journal of Energy Markets, the Journal of Economic Dynamics and Control, the Journal of Public Economic Theory, and Computational Economics.