Coordinated multilateral trades for electric power networks

Abstract

Recent moves to open up electric power transmission networks to foster generation competition and customer choice have touched off a debate over how the transmission system should be restructured in order to meet the goal. The opposing sides of this debate are now commonly represented by the bilateral model and the poolco model. Both models resort to conventional centralized operation in dealing with the shared resources of an integrated transmission network. The conventional operating paradigm was developed in a different era for electric utilities operated as regulated monopolies. A new operating paradigm is needed for a restructured industry that encourages efficient competition and at the same time maintains necessary coordination to guarantee a high standard of reliability. We propose a new operating paradigm in which the decision mechanisms regarding economics and reliability (security) of system operation are separated. Economic decision is carried out by private multilateral trades among generators and consumers. The function of reliability is coordinated through the power system operator who provides publicly accessible data based on which generators and consumers can determine profitable trades that meet the secure transmission loading limits. We prove that any sequence of such coordinated private multilateral trades, each of which benefits all parlies to the trade, leads to efficient operations, i.e., maximizes social welfare. The coordinated multilateral trading model achieves all the benefits of a centralized pool operation without the visible hand of a pool operator in economic decisions. It is also shown that the coordinated multilateral trading model can coexist with the traditional model and provides non-discriminatory service to both utility customers and direct-access customers.