Gen 101 LMP Overview

`
Locational Marginal Pricing

PJM Member Training Department
GEN-101 Training
1/8/2008
2008 PJM
www.pjm.com
Agenda
Locational Marginal Pricing - LMP
1/8/2008
Definition of LMP
5-bus Example
LMP Verification & Posting process
LMP Statistics
2008 PJM
www.pjm.com
What is LMP?
Pricing method PJM uses to:
price energy purchases and sales in PJM Market

price transmission congestion costs to move
energy within PJM RTO
Physical, flow-based pricing system:

how energy actually flows, NOT contract paths
1/8/2008
2008 PJM
www.pjm.com
LMP Analogy
LMP is analogous to a taxi ride for MWs!

Light traffic = Consistent, predictable fare
1/8/2008
2008 PJM
www.pjm.com
LMP Analogy
LMP is analogous to a taxi ride for MWs!

Heavy traffic = Higher fare
1/8/2008
2008 PJM
www.pjm.com
How is LMP Used?
Generators get paid at generation bus

LMP
Loads pay at load bus LMP
Transaction pay differential in source

and sink LMP
1/8/2008
2008 PJM
www.pjm.com
Locational Marginal Price
System
System
Energy
Energy
Price
Price
Transmission
Congestion
Cost
Cost of
Marginal
Losses
Cost to serve the next MW of load at a specific location,

using the lowest production cost of all available generation,
while observing all transmission limits
1/8/2008
2008 PJM
www.pjm.com
System
System
Energy
Energy
Price
Price
Transmission
Congestion
Cost
Cost of
Marginal
Losses
System Energy Price

Represents optimal dispatch ignoring congestion and losses
Same price for every bus in PJM
Used to price Spot Market Interchange
Spot Market buyer pays system energy price
Spot Market seller is paid system energy price
Calculated both in day ahead and real time

1/8/2008
2008 PJM
www.pjm.com
System
System
Energy
Energy
Price
Price
Transmission
Congestion
Cost
Cost of
Marginal
Losses
Congestion Price
Represents price of congestion for binding constraints
Calculated using cost of marginal units controlling constraints and sensitivity factors
on each bus
No change in this calculation
Will be zero if no constraints

Will vary by location if system is constrained
Used to price explicit and implicit congestion (Locational Net Congestion Bill)
Load pays Congestion Price
Generation is paid Congestion Price
Congestion revenues allocated as hourly credits to FTR holders
Calculated both in day ahead and real time

1/8/2008
2008 PJM
www.pjm.com
System
System
Energy
Energy
Price
Price
Transmission
Congestion
Cost
Cost of
Marginal
Losses
Loss Price
Represents price of marginal losses
Calculated using penalty factors as previously described
Will vary by location

Used to price explicit and implicit losses (Locational Net Loss Bill)
Load pays the Loss Price
Generation is paid the Loss Price
Loss revenues are allocated based on load + exports ratio share
Calculated both in day-ahead and real-time

1/8/2008
2008 PJM
www.pjm.com
10
Transmission Losses
Real Power (MW) Losses
1/8/2008
Power flow converted to heat in transmission equipment

Heat produced by current (I) flowing through resistance (R)
Losses equal to I2R
Heat loss sets the thermal rating of equipment
2008 PJM
www.pjm.com
11
Dispatch Rate
Definition: The Dispatch Rate is expressed in dollars per

MWh, calculated and transmitted to each generator to direct
the output level of all generation resources dispatched by
PJM based on the incremental offer data which was
previously received from the Generators.
1/8/2008
2008 PJM
www.pjm.com
12
Dispatch Rate
The Dispatch Rate is determined by the PJM economic

dispatch solution as calculated by PJMs Unit
Dispatch System (UDS)
$35
$30
DispatchRate
Rate==$25
$25
Dispatch
Offer Price $25

$20
0
50
100
MW
150
200
EconomicBasepoint
Basepoint
Economic
The Economic Basepoint is the MW value sent to the generating unit

that indicates to what level the unit should be loaded based on the
economic dispatch solution and the units incremental price curve
1/8/2008
2008 PJM
www.pjm.com
13
Penalty Factors Effect on Dispatch
The Incremental Loss for bus i is used to calculate a factor that can
be used to include the effect of losses in the dispatch
This factor is called the Loss Penalty Factor, or Penalty Factor
1
Pfi =
PL
1
Pi
Change in Losses
Change in Units MW Output
The Penalty Factors adjust the incremental cost of each generator

so as to include the effects of losses
Penalty factors applied to each and every location
Including generation, load, virtual transaction
1/8/2008
2008 PJM
www.pjm.com
14
If an increase in generation results in an

increase in system losses then:
Penalty factor is greater than 1
Units offer curve is adjusted higher
Unit offer curve is multiplied by penalty factor
Unit looks less attractive to dispatch
PL
0<
<1
Pi
1/8/2008
2008 PJM
1
> 1 .0
Pfi =
PL
1
Pi
www.pjm.com
15
If an increase in generation results in a

decrease in system losses then:
Penalty factor is less than 1
Units offer curve is adjusted lower
Unit offer curve is multiplied by penalty factor
Unit looks more attractive to dispatch
Total LMP would still at least equal units original offer
PL
0>
> 1
Pi
1/8/2008
2008 PJM
1
Pfi =
< 1.0
PL
1
Pi
www.pjm.com
16
Penalty Factors Effect on Dispatch - Example # 1
Generating Unit # 1
Generating Unit # 2
Offer Price = $ 10.00 ----- 200 MW

$ 20.00 ----- 300 MW
$ 30.00 ----- 400 MW
$ 40.00 ----- 500 MW
Offer Price = $ 10.00 ----- 200 MW

$ 20.00 ----- 300 MW
$ 30.00 ----- 400 MW
$ 40.00 ----- 500 MW
Generating 300 MW
Generating 300 MW
Penalty Factor = 1.00

$20 * 1.00 = $20.00
(Unit offer price stays the same)
Penalty Factor = .97

$20 * 0.97 = $19.60
(Unit offer price adjusted lower)
Penalty Factors Effect on Dispatch - Example # 2
Generating Unit # 1
Generating Unit # 2
Offer Price = $ 10.00 ----- 200 MW

$ 20.00 ----- 300 MW
$ 30.00 ----- 400 MW
$ 40.00 ----- 500 MW
$ 50.00 ----- 600 MW
Offer Price = $ 10.00 ----- 200 MW

$ 20.00 ----- 300 MW
$ 30.00 ----- 400 MW
$ 40.00 ----- 500 MW
$ 50.00 ----- 600 MW
Generating 500 MW
Generating 500 MW

$40 * 1.05 = $42.00
(Unit offer price adjusted higher)

$40 * 1.00 = $40.00
(Unit offer price stays the same)
LMP & Economic Dispatch
Dispatch Rate
LMP
Directive
Where PJM wants

The units to be
loaded economically
Result
Based on actual
loading of each unit
If units dont move to follow dispatch rate, LMP will not change!
1/8/2008
2008 PJM
www.pjm.com
19
LMP Model
Generator Offers
Dispatch Rates *
Dispatchable Transactions
Siemens
Siemens
State
State
Estimator
Estimator
Real-Time
Data
(EMS)
Dispatcher
Input
Flexible Generating
Units & Offers
LPA
LPA
Energy Demand
Generator MW
System Topology
Unit
Unit
Dispatch
Dispatch
System
System(UDS)
(UDS)
LMPs for
all locations
Binding Transmission
Constraints
Manual Dispatcher Input

1/8/2008
LPA
Preprocessor
LPA = Locational Pricing Algorithm

2008 PJM
www.pjm.com
20
LMP Execution Steps
n Determine current system conditions

energy demand
generator MW values
system topology
o Process generator offers & dispatch

rates to determine flexible generators
p Collect current system constraint data
q Execute Locational Price Algorithm
1/8/2008
2008 PJM
www.pjm.com
21
Resources Included in LMP Calculation
Steam units
Output > 0; status is on; and offer price dispatch rate
Offer price > dispatch rate and output 110% Desired MW (following
economic control signals)

Running for transmission & logged
Combustion Turbines
Output > 0; on at base for economics; and operating rate dispatch
rate
Running for transmission & logged
Pool Transactions
Transaction bid price (into PJM) dispatch rate
Transaction bid price (out of PJM) dispatch rate
1/8/2008
2008 PJM
www.pjm.com
22
INPUT
State
Estimator
Unit MW
Output
Levels
eMKT
UDS
Unit
Offer
Data
Dispatch
Rates and
Desired
MWs
LPA Preprocessor
Start
Unit On-Line
(MW >0)
Yes
Yes
No
Unit Type = CT?
Uni Min
Equal to
Unit Max?
No
Unit Bid <=

Unit Rate?
No
No
Yes
No
Unit Ineligible
For LPA
Yes
Unit Type =
Steam?
No
Unit MW <=
110% of Desired
MW
Yes
Set Resource
Offer price
=
Marginal Cost
Yes
End
OUTPUT
List of Units
Eligible for
LPA
LPA
Unit Eligible
For LPA
Examples of What Units can set LMP
Example # 1
Steam unit with incremental offer curve as follows:
$35
Offer Price
$30
$25
Units dispatch rate is $30

Unit is producing 150 MW
$20
50
100
150
200
Can this unit set LMP?
MW
Yes. The unit would be the marginal unit and set LMP for the
system if unconstrained.
1/8/2008
2008 PJM
www.pjm.com
24
Example # 2
Steam unit with incremental offer curve as follows:
$35
9
$30
Offer Price $25

Unit is producing 150 MW
$20
Can this unit set LMP?

50
100
150
MW
1/8/2008
2008 PJM
www.pjm.com
25
Example # 3
Combustion Turbine (CT) with an offer as follows:
$35
$30
Offer Price $25

$20

PJM requests CT to run for a
transmission constraint
Can this CT set LMP?

50
100
150
MW
1/8/2008
2008 PJM
www.pjm.com
26
Example # 4
Combustion Turbine (CT) with an offer as follows:
$35
$30
Offer Price $25
$20
50
100
150
MW
1/8/2008

PJM no longer needs the CT for
transmission control
CT must run for 2 more hours to satisfy a
minimum run time requirement
2008 PJM
Can this CT set LMP?
www.pjm.com
27
High & Low LMPs
Thermal Limit
Receiving End
Sending End
Highest LMP at immediate receiving end of constraint
Lowest LMP at immediate sending end of constraint
Two marginal units control one constraint; three

marginal units two constraints, etc...
1/8/2008
2008 PJM
www.pjm.com
28
Agenda
1/8/2008
Definition of LMP
5-bus Example
LMP Verification and Posting process
LMP Statistics
2008 PJM
www.pjm.com
29
Example # 1 - 5 Bus Transmission Grid
System Overview
E
XED = 2.97%
230 MW
Thermal Limit
D
Sundance
Brighton
XAD = 3.04%
XEA = 0.64%
XBC = 1.08%
Alta
Park City
XCD = 2.97%
Solitude
XAB = 2.81%
Impedances as shown
R = 0 for all lines
Legend
Bus
Transmission
Line
Load
Generators
30

Unconstrained System
Loads = 669
230 MW
Thermal Limit
Brighton
Sundance
Load =
223 MW
A
Alta
Park City
Loads = 223 MW each

31
Solitude

Generator Offers
600 MW
$10/MWh
Brighton
Sundance
230 MW
Thermal Limit
200 MW
$40/MWh
223 MW
A
Alta
110 MW
$14/MWh
Solitude
223 MW
Park City
100 MW
$15/MWh
32
B 223 MW C
520 MW
$30/MWh

Dispatch & Energy Flow
230 MW
Thermal Limit
Brighton
200 MW
$40/MWh
371
293
153
147
A
Alta
Sundance
229
600 MW
600 MW
$10/MWh
70
69 MW
Solitude
223 MW
Park City
110 MW
$14/MWh
223 MW
100 MW
$15/MWh
33
223 MW
520 MW
$30/MWh
Total Load 669
LMPs - No Loss Component Included

$14
230 MW
Thermal Limit
Brighton
$14
D
200 MW
$40/MWh
229
147
Alta
293
70
69 MW
$14 A
223 MW
Solitude
223 MW
Park City
110 MW
$14/MWh
153
371
600 MW
600 MW
$10/MWh
Sundance
100 MW
$15/MWh
34
223 MW
$14
$14
520 MW
$30/MWh
Alta - Marginal Unit

LMPs - Loss Component Included
Area Load = 669
Area Losses = 17 MW
Area Generation = 686
Brighton - 600 MW
Alta - 86 MW
LMP = $13.83
PF = 1.0624
200 MW
$40/MWh
Alta
153
371
147
70
293
223 MW
Park City
110 MW
$14/MWh
223 MW
Solitude
86 MW
600 MW
$10/MWh
PF = 1.0492
Sundance
229
600 MW
LMP = $14.00
PF = 1.0247
230 MW
Thermal Limit
Brighton
LMP = $14.33
100 MW
$15/MWh
223 MW
LMP = $14.61
35
PF = 1.0053
520 MW
$30/MWh
LMP = $14.69
PF = 1.00

Constrained System
Loads = 900
E
D Sundance
230 MW
Thermal Limit
200 MW
$40/MWh
Brighton
Load = 300 MW
600 MW
$10/MWh
A
Solitude
Alta
110 MW
$14/MWh
Park City
100 MW
$15/MWh
36
C
Loads = 300 MW
520 MW
$30/MWh

Dispatch Solution Ignoring Thermal Limit
Dispatched
at 600 MW
230 MW
Thermal Limit
D
200 MW
$40/MWh
253
Brighton
174
600 MW
$10/MWh
384
216
348
Sundance
84
Dispatched
90 MW
Solitude
Alta
110 MW
$14/MWh
Dispatched
at 110 MW
300 MW
300 MW
Park City
100 MW
$15/MWh
300 MW
Dispatched
100 MW 37
520 MW
$30/MWh
Total Dispatched
900 MW

Actual Dispatched Generation
230 MW
Thermal Limit
Dispatched E
Sundance
200 MW
$40/MWh
at 510 MW
Brighton
300 MW
600 MW
$10/MWh
A
Alta
110 MW
$14/MWh
Dispatched
at 110 MW
300 MW
Park City
100 MW
$15/MWh
Dispatched
at 100 MW
300 MW
Solitude
Dispatched 520 MW
at 180 MW $30/MWh
Total Dispatched
900 MW
38

Energy Flow
200 MW
$40/MWh
230 MW
Thermal Limit
A
Alta
110 MW
$14/MWh
Sundance
225
180
178
309
304
101
195 MW
100 MW
600 MW
$10/MWh
280
110 MW
510 MW
279
230
Brighton
102
300 MW
Park City
100 MW
$15/MWh
39
300 MW
300 MW
Solitude
520 MW
$30/MWh
LMPs - No Loss Component Included

230 MW
Thermal Limit
178
280
180
510 MW
309
Alta
110 MW
$14/MWh
304
101
195 MW
100 MW
$17.00 A
110 MW
600 MW
$10/MWh
Sundance
225
230
279
Brighton
$40.00
D
102
$10.00
200 MW
$40/MWh
300 MW
Marginal Generators
100 MW
$15/MWh
40
Solitude
520 MW
$30/MWh
300 MW
B
$26.40
Park City
300 MW
$30.00

LMPs - Loss Component Included
Area Load = 900
Area Losses = 15 MW
Area Generation = 915
Brighton - 510 MW
Alta - 110 MW
Park City - 100 MW
Solitude - 195
LMP = $10.00
600 MW
$10/MWh
Alta
PF = 1.0450
309
304
195 MW
300 MW
LMP = $16.76
Park City
110 MW
$14/MWh
Sundance
200 MW
$40/MWh
178
180
280
279
510 MW
225
230
110 MW
Brighton
PF = 1.0162
102
100 MW
PF = 1.0555
LMP = $39.35
100 MW
$15/MWh
B 300 MW C
LMP = $26.61
41
PF = 1.0024
300 MW
Solitude
520 MW
$30/MWh
LMP = $30.00
PF = 1.00
LMP & Sensitivity Factors
Solitude & Brighton supply the next increment of load on

the system (Marginal generators)
Attempt to serve an additional increment of load (1 MW)
Resulting Sensitivity Factors determine LMP
Least Cost Security Constrained Dispatch Algorithm
Calculates least expensive way to serve load while

respecting transmission limit
Power flow analysis calculates Sensitivity Factors
1/8/2008
2008 PJM
www.pjm.com
42
Sensitivity Factors
Sensitivity Factors calculate the price to deliver power to

every location in PJM in the least expensive way
Based on System impedance
Big pipe = lower impedance = more power flow
Garden hose = high impedance = less power flow
Based on impact of marginal generators on transmission

constraint and generator price
1/8/2008
2008 PJM
www.pjm.com
43
Example # 2 - LMP Calculations

LMP Calculations - No Loss Component
How would 1 MW of energy be supplied to each bus from the two
marginal units without violating the transmission constraint?
Sensitivity Factors
(for 1 MWh of Load Supplied from)
Bus
Calculation
(MWh) (Brighton Unit Price) +
(MWh) (Solitude Unit Price) +
Brighton
Solitude
LMP
@ $10/MWh
@ $30/MWh
0.65 MWh
0.35 MWh
0.65 ($10) + 0.35 ($30)
$17.00
0.18 MWh
0.82 MWh
0.18 ($10) + 0.82 ($30)
$26.40
0.00 MWh
1.00 MWh
0.00 ($10) + .1.00 ($30)
$30.00
-0.50 MWh
1.50 MWh
-0.50 ($10) + 1.50 ($30)
$40.00
1.00 MWh
-0.00 MWh
1.00 ($10) + 0.00 ($30)
$10.00
The sensitivity factors reflect the amount of cost effective generation required to
supply 1 MW of load at each bus, without increasing the flow on the contingency
System Energy Price = LMP at

the Reference Bus (where
Congestion & Losses = 0)
Solitude Energy LMP = $ 30.00

Congestion LMP = $0.00
Losses LMP = $ 0.00
520 MW
$30/MWh Total LMP = $30.00
PF = 1.00
Reference or Slack Bus is the

electrical load center of the
system
Losses are calculated using

the System Energy Price &
the Penalty Factor (Pf)
1/8/2008
2008 PJM
System
Energy
Price
www.pjm.com
1
Pf
45
Example # 2 - Losses Calculation

System
Energy
Price
1
Pf
Bus
Penalty
Factor
Calculation
1.0450
1 - 1
30.00 *
1.0450
$-1.29
1.0024
1
30.00 * 1.0024- 1
$-0.07
1.00
1
- 1
30.00 *
1.00
$0.00
1.0162
1 - 1
30.00 * 1.0162
$-0.48
1.0555
1 - 1
1.0555
$-1.58
30.00 *
Total Losses

LMP Calculations - Loss Component Included
How would 1 MW of energy be supplied to each bus from the two
marginal units without violating the transmission constraint?
3 LMP Components
Calculation
Bus
System Energy
Price
Congestion
Losses
(Using Sensitivity Factors for 1 MW of Load

Supplied From Marginal Generators:
Brighton & Solitude)
LMP
$30.00
$ -11.95
$ -1.29
0.65 ($10) + 0.342 ($30)
$16.76
$30.00
$ -3.32
$ -0.07
0.171 ($10) + 0.83 ($30)
$26.61
$30.00
$ 0.00
$ 0.00
0.00 ($10) + 1.00 ($30)
$30.00
$30.00
$ 9.82
$ -0.48
-0.535 ($10) + 1.45 ($30)
$39.35
$30.00
$ -18.42
$ -1.58
1.00 ($10) + -0.00 ($30)
$10.00
Agenda
1/8/2008
Definition of LMP
5-bus Example
LMP Statistics
2008 PJM
www.pjm.com
48
Real-Time LMPs
Calculated & posted on PJM website at 5minute intervals
Based on actual operating conditions, as

described by State Estimator
Integrated at end of each hour (five-minute

real-time LMPs) & posted on PJM website
Market settlements performed based on

hourly integrated LMPs (after LMP
Verification Process!!!)
1/8/2008
2008 PJM
www.pjm.com
49
Operational Data Page
1/8/2008
2008 PJM
www.pjm.com
50
Operational Data Page
Zonal LMPs are Load-weighted LMPs

Correspond to PJM Transmission zones
Hub LMPs use equal weighting at each bus included in the Hub
Western Hub most popular
Interface LMPs are dynamically weighted based on flow on
each tie-line of the interface
More accurately reflects physical flow
Aggregate LMPs can be generation or load weighted
Can be requested by LSE or Generation owner
Detailed definitions of Zones, Hubs, Interfaces, and Aggregates can be
found at pjm.com by accessing > Markets > Energy > LMP Model
1/8/2008
2008 PJM
www.pjm.com
51
Daily LMP Verification Process
n Reviews following logs:

Dispatcher logs
Program error logs
LMP results for each interval
o Recalculates or replaces LMPs, as required

p Notifies Market Settlements LMPs are verified & ready
to use in accounting
q Posts verified hourly LMPs for previous operating day
on PJM website
1/8/2008
2008 PJM
www.pjm.com
52
LMP Summary
LMP is the pricing mechanism for wholesale power in the

PJM energy market
9 LMPs components include System Energy Price,
Congestion (if it exists) and Losses (when applicable)

9 Only units following PJM dispatch instructions can set LMP
9
Although all units get paid LMP for their MW output
9 Real-time LMPs are posted on the PJM home page and on
internet tools such as eDATA

9
1/8/2008
Verified hourly integrated LMPs are used for Market Settlements
2008 PJM
www.pjm.com
53
Questions?
1/8/2008
2008 PJM
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54
Contact Information
PJM Customer Relations

Telephone: (610) 666-8980
Toll Free Telephone: 866-400-8980
Fax: (610) 666-4379
World wide web: www.pjm.com
email: http://www.pjm.com/contact/questions.html
Subscribe to PJM e-mail lists at:
http://www.pjm.com/about/contact/form-majordomo.html
and for Market Integration:
http://www.pjm-cem.com/documentation/form-mdomo.html
1/8/2008
2008 PJM
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55
Agenda
1/8/2008
Definition of LMP
5-bus Example
LMP Statistics
Dynamic LMP Simulations
2008 PJM
www.pjm.com
56
Average LMP - 2006
1/8/2008
2008 PJM
www.pjm.com
57
Average LMP Over the Years
1/8/2008
2008 PJM
www.pjm.com
58
Average LMP Over the Years
1/8/2008
2008 PJM
www.pjm.com
59
PJM Price Duration Curves - 2006
Shows%
%of
ofhours
hoursPJM
PJMwas
wasat
ator
orbelow
belowaagiven
givenprice
price
Shows
1/8/2008
2008 PJM
www.pjm.com
60
PJM Price Duration Curves 2002-2006
Shows%
%of
ofhours
hoursPJM
PJMwas
wasat
ator
orbelow
belowaagiven
givenprice
price(95-100
(95-100percentiles)
percentiles)
Shows
1/8/2008
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www.pjm.com
61
LMP Frequency Distribution - 2004
Shows##of
ofhours
hoursat
ateach
eachLMP
LMPrange
range
Shows
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www.pjm.com
62
Shows##of
ofhours
hoursat
ateach
eachLMP
LMPrange
range
Shows
1/8/2008
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www.pjm.com
63
1/8/2008
2008 PJM
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64
Constrained Hours 2005-2006
1/8/2008
2008 PJM
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65
The PJM Top 23 Constraints - 2004
1/8/2008
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66
The PJM Top 25 Constraints - 2005
1/8/2008
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67
Constraint Summary 2005 - 2006
1/8/2008
2008 PJM
www.pjm.com
68
Constraints by Voltage Level
ConstrainedEvent
Eventhours
hoursinclude
includeimpact
impact
Constrained
ofsimultaneous
simultaneousconstraints
constraints
of
1/8/2008
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69
Constrained Costs by Zone
1/8/2008
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Gen 101 LMP Overview

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Gen 101 LMP Overview

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`

Locational Marginal Pricing

Locational Marginal Pricing - LMP

Pricing method PJM uses to:

price energy purchases and sales in PJM Market

Physical, flow-based pricing system:

LMP is analogous to a taxi ride for MWs!

LMP is analogous to a taxi ride for MWs!

How is LMP Used?

Generators get paid at generation bus

Loads pay at load bus LMP

Transaction pay differential in source

Locational Marginal Price

Cost to serve the next MW of load at a specific location,

Locational Marginal Price

System Energy Price

Spot Market buyer pays system energy price

Spot Market seller is paid system energy price

Calculated both in day ahead and real time

Locational Marginal Price

Will be zero if no constraints

Calculated both in day ahead and real time

Locational Marginal Price

Will vary by location

Calculated both in day-ahead and real-time

Real Power (MW) Losses

Power flow converted to heat in transmission equipment

Definition: The Dispatch Rate is expressed in dollars per

The Dispatch Rate is determined by the PJM economic

Offer Price $25

The Economic Basepoint is the MW value sent to the generating unit

Penalty Factors Effect on Dispatch

The Penalty Factors adjust the incremental cost of each generator

Penalty Factors Effect on Dispatch

If an increase in generation results in an

Penalty Factors Effect on Dispatch

If an increase in generation results in a

Penalty Factors Effect on Dispatch - Example # 1

Offer Price = $ 10.00 ----- 200 MW

Offer Price = $ 10.00 ----- 200 MW

Penalty Factor = 1.00

Penalty Factor = .97

Penalty Factors Effect on Dispatch - Example # 2

Offer Price = $ 10.00 ----- 200 MW

Offer Price = $ 10.00 ----- 200 MW

Penalty Factor = 1.05

Penalty Factor = 1.00

LMP & Economic Dispatch

Where PJM wants

Manual Dispatcher Input

LPA = Locational Pricing Algorithm

LMP Execution Steps

n Determine current system conditions

o Process generator offers & dispatch

Resources Included in LMP Calculation

economic control signals)

Unit Bid <=

Examples of What Units can set LMP

Units dispatch rate is $30

Can this unit set LMP?

Examples of What Units can set LMP

Offer Price $25

Units dispatch rate is $15