Panel Presentation:

Theoretical and Practical Considerations in Implementing and Using a Reliability Unit

Commitment (RUC) in Restructured Electricity Markets
Dr. Alex Papalexopoulos, Fellow IEEE
President, ECCO International, Inc.
San Francisco, CA

Panel:
Reliability Unit Commitment
Sponsored by: IEEE PES Power System Analysis, Computing and Economics Committee

Panel Chair: Dr. Avnaesh Jayantillal and Dr. Jun Yu

2006 IEEE Power Engineering Society General Meeting
June 18-22, 2006
Montreal, QC, Canada

It has been widely accepted that in restructured electricity
markets a Reliability Unit Commitment (RUC) function is
needed to ensure reliability. Specifically, the purpose of RUC
is to ensure that sufficient capacity is available at proper
locations to meet real-time energy and associated ancillary
services requirements. Since the scheduled load that clears the
Day-Ahead Market (DAM) and Hour-Head Market (HAM)
may be less than the actual load for a variety of reasons, the
resource committed in the DAM and HAM may not be
sufficient to meet the energy and capacity requirements in
real-time. Therefore, a RUC function is needed to reserve
enough on-line capacity to meet the load forecast obtained in
DA and the associated operating reserve requirements; while
the objective of DAM is to procure energy and capacity to
meet the DA scheduled load and the DA ancillary service
requirements. The objective of the HA RUC is to reserve
enough on-line capacity to meet the load forecast obtained in
HA; while the objective of HAM is to procure energy and
capacity to meet the HA scheduled load and the HA ancillary
service. Both the DA RUC and the HA RUC will include
system-wide as well as locational needs.
The fundamental methodology for solving the RUC problem
is based on the Security Constrained Unit Commitment
(SCUC) that is also used in clearing the forward markets.
Both the DAM and the RUC processes are based on a
centralized unit commitment optimization that allows multi-
part offers (with capacity bids, start-up, no-load and
incremental energy bids). The RUC optimization considers
inter-temporal operational constraints for generators (ramp-
rates, minimum output, minimum run times, etc.), and
incorporates transmission constraints in developing a least-
cost commitment and dispatch for a twenty-four hour period.
(The time horizon may be extended to 5 days or a week.) Both
utilize a Full Network Model (FNM) that includes all
transmission constraints, branch group and nomogram
constraints.
However, there are also differences between the DAM and
the RUC processes. The proposed IFM process is based on
bid-in and self scheduled demand, while the proposed RUC
process uses the ISO’s load forecast. The objective function
in the DAM is to minimize the overall costs as reflected by
start-up, no-load and incremental offer prices, and where
relevant, Ancillary Services (A/S) capacity bids. The
objective function of the RUC function, in many but not all
cases, is the same as the objective function of the DAM
optimization (with availability payment in lieu of capacity
adder). The three-part bids submitted in the DAM will be
also used in the RUC process. Resources committed in the
DAM will be modeled as “must-run” in RUC, i.e., these
resources will not be de-committed.
In some other markets the RUC process minimizes only the
start-up and no-load components for additional commitments.
This is motivated by the goal of minimizing uplift costs
resulting from start-up and no-load prices, as well as creating
incentives for market participants to make bids and offers as
accurately as possible in the DAM. However in some
regions, this may give an advantage to dispatch of imports
(without any start-up and no-load bid component) before
dispatch of generators in the ISO region (that do have start-
up and no-load bids). If imports selected as reliability
reserves are assured payments, regardless of whether the
energy is truly needed in real time, this bias could result in
inefficient market outcomes. Additionally, generators
selected in the RUC process that are dispatched at their
minimum block can also contribute to uplift costs because of
their minimum load cost may exceed the LMP. Ignoring
energy prices completely in the RUC process may not result
in the lowest possible uplift.
The RUC process will procure a combination of energy and
unloaded capacity. It will procure 100 percent of the capacity
needed to meet the ISO’s requirements taking into account

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the energy obtained from the DAM schedules, energy
corresponding to minimum generation limit from the
additional committed resources in RUC and energy from
selected inter-ties. The ISO will use the RUC results
considering the start up time of the units. For example, if a
unit with 4 hours of start up time is slated to be committed
based on the DA RUC results, the ISO will defer the actual
commitment decision of that resource to the corresponding
HA RUC.
However, the sum of energy from DAM schedules, minimum
offload from additionally committed resources, and energy
from selected inter-ties should not exceed 95 percent of the
energy to meet next day’s hourly demand forecast. This is
deemed necessary to allow for load forecast errors, to
minimize the risk of over-procurement of energy by the RUC,
and to avoid creating an incentive for loads to under-schedule
in the Day Ahead market.
Energy procured in the DA RUC in the form of minimum load
from committed resources and energy schedules from selected
System Resources (inter-ties) will be submitted to the Hour
Ahead market as a price taker. Any of this energy not cleared
in the Hour Ahead market will be submitted again to Real
Time as a price taker. Costs associated with RUC will be
borne by the Market Participants whose metered load is not
fully scheduled in the DAM (excluding Metered Subsystem
load that is covered by its own resources.)
In this presentation the theoretical foundation of the RUC
process and key important considerations in implementing
RUC will be presented. We’ll also provide a description of the
general sequential approach in which the IFM process is
executed first and then the RUC process is completed. We
then offer a brief exposition of the merits of the simultaneous
approach where the DAM and RUC clear simultaneously.
Finally, if the DAM and RUC processes are performed
sequentially, then the issue is which should be performed
first. If RUC is committed after the DAM, additional units
are committed which consequently causes over-commitment
of resources. Also, the RUC is based on “RUC Availability
Bids” which are meant to represent unclear “opportunity
costs.” One can make the case that “opportunity costs” in
general do not exist. If one uses zero values for these bids,
the optimization is purely based on start-up and minimum
load costs and transmission availability. Such commitment
decisions are not optimal because the eventual energy costs
have been ignored.
If the RUC is performed after DAM, the minimum load
energy from units committed in RUC is not included in
DAM. If RUC were performed before DAM, the minimum
load energy could be cleared in the DAM reducing the DAM
LMPs. Although RUC minimum load could be cleared in
real-time, the energy volume in DAM is higher and more
load can benefit from the resulting price reduction.
Therefore, clearing RUC before the DAM, could reduce the
incentive for load to under-schedule.
We’ll also present the reasons for performing RUC after the
DAM. The additional RUC commitment and capacity cost
could be allocated to under-scheduled load. There is a “clear”
cost-causation for the additional commitment. The RUC cost
could service as deterrence for load under-scheduling.
However, one can dispute the efficiency of this incentive as a
deterrent for load under-scheduling.
Another important issue is the application of the LMP in the
RUC awards. One can make the case that this is not
appropriate. In this presentation we’ll also touch upon pricing
issues of the RUC awards. Finally, other practical issues,
such as the modeling of fast startup units, combined cycle
units, treatment of market power mitigation in RUC and
settlement rules are also discussed in the presentation.