Joint GERAD Seminar with the NSERC-Hydro-Quebec-Schneider Electric Industrial Research Chair on Optimization for the Smart Grid

Title: Revenue and network-constrained day-ahead market clearing under marginal pricing

Speaker: Natalia Alguacil – Universidad de Castilla-La Mancha, Spain

In this seminar a practical day-ahead auction model, where generation revenue constraints are explicitly incorporated in the problem formulation, will be presented. The revenue-constrained market-clearing procedure includes the effect of the transmission network, inter-temporal constraints associated with generation scheduling, demand-side bidding, and marginal pricing. This auction design is an instance of price-based market clearing which features two major complicating factors. First, locational marginal prices become decision variables of the optimization process. In addition, producer revenues are formulated as bilinear and nonconvex products of power outputs and market-clearing prices. The resulting problem is formulated as a mixed-integer nonlinear bilevel program with bilinear terms for which available solution techniques rely on heuristics, approximations, or modeling simplifications. This work shows a novel and exact methodology whereby the original problem is recast as an equivalent single-level mixed-integer linear program. As a consequence, finite convergence to optimality is guaranteed and the use of standard commercial software is allowed. The proposed transformation is based on duality theory of linear programming, Karush-Kuhn-Tucker optimality conditions, and integer algebra results.

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