On the economics of power system security in multi-settlement electricity markets

Teoman Güler, George Gross, Eugene Litvinov, Ron Coutu

Research output: Contribution to journalArticlepeer-review


The tight coupling between system and market operations implies that there are strong interrelationships between system security management and market performance. Therefore, the assurance by the regional transmission organization (RTO) of secure system operations strongly depends on, and directly impacts, electricity markets. Typically, electricity is traded in a sequence of markets that are cleared at different frequencies and with different lead times. In this paper, we focus on the hourly day-ahead markets (DAMs) and their associated real-time markets (RTMs) that clear, typically, every 5 to 10 min. The DAMs' clearing impacts the nature and the extent of the participants' responses to real-time conditions and, therefore, the real-time system operations, which, in turn, impact system security. The basic thrusts of this work are to quantitatively characterize the linkages between the real-time system security and the day-ahead markets as well as to investigate the role of the financial entities in a multi-settlement system. We develop a systematic approach that allows us to quantify the auction surplus attained through the multi-settlement system and evaluate the impacts of the DAMs on market participants' bid/offer surpluses as well as on improving the ability to facilitate real-time secure power system operations. We illustrate the application of the approach on the large-scale ISO-NE multi-settlement system using the historical 20052009 datathe system model and the bids/offers submittedand the actual market clearing methodology. The studies bear out the well known fact that the participation of financial entities leads to the convergence of the DAM and the associated RTM prices. Moreover, these studies also illustrate that such participation leads to improved forecasts of the real-time system operations, and consequently results in improving the assurance of system security.

Original languageEnglish (US)
Article number5395751
Pages (from-to)284-295
Number of pages12
JournalIEEE Transactions on Power Systems
Issue number1
StatePublished - Feb 2010


  • Auction surplus maximization
  • Day-ahead and real-time electricity markets
  • Financial entities
  • Multi-settlement system
  • Power system security management
  • Security criterion

ASJC Scopus subject areas

  • Energy Engineering and Power Technology
  • Electrical and Electronic Engineering


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